Donating to Charity: The Basics

Charitable contributions can make a big difference within your community and beyond. There are many nonprofit organizations you can support with donations, making it possible for them to help others while also potentially lowering your own tax bill.

How Does Charitable Giving Affect Taxes?

While the main goal of donating to charity is to provide financial support to the organizations you care about, there’s an added benefit to you in the form of tax deductions. Certain charitable gifts are tax-deductible, which means you can claim the donations to reduce your taxable income for the year. Many people make donating a regular part of their financial plan by mapping out how much they’d like to donate each month as part of their monthly budget.

Strategically donating to charity as part of your retirement plan also has its perks. When you make a qualified donation from a traditional IRA to charity, you may not be required to pay taxes on the distribution.

What Are Charitable Contribution Limits?

Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. A contribution is considered “for the use of” when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. If you make a property donation to a qualified organization, you can generally deduct the fair market value of the property at the time of the contribution. 

Your charitable contribution deductions generally can't be more than 60% of your adjusted gross income (AGI), but in some cases the limits for itemized deductions max out at 20-50%, so be sure to talk to a tax professional before making a large donation. 

Keep in mind that the contributions must be made to a qualified organization and not set aside for use by a specific person. The IRS only allows you to deduct contributions made to qualified nonprofit organizations. To determine if a donation is tax-deductible, use the IRS Exempt Organizations Select Check tool.

6 Facts About Charitable Giving

As you consider your gifts this year, check out these facts about donating to charity.

1. In 2022, total giving to charitable organizations in the U.S. amounted to an estimated $499.33 billion  — a decrease of 3.4% since 2021.

1. Charitable organizations depend on donations from individuals. In fact, donations received by nonprofit organizations are largely made by individuals. In 2022, individual giving made up 64% of all donations.  

1. Giving in 2022 increased in many sectors, with double-digit growth in gifts for foundations (10.1%) and international affairs (10.1%). 

1. Charities sometimes need flexibility in how they use donations. Designating money to a specific project is great, but you should also consider giving without conditions, allowing the organization the flexibility to meet changing needs — including just keeping the lights on.

1. Diversification in charitable giving is not as valuable as concentration. While having variety in your retirement portfolio is valuable, spreading your donations thin could actually keep your favorite charity from making a larger impact.

1. You can use life insurance to give to charity. Designate your favorite charity as a beneficiary on your life insurance policy* and you can make a larger gift than otherwise possible. Your local Farm Bureau agent can provide more information and assist in this process.

Make Your Donations Go Farther

Whether you’re considering making a one-time contribution or planning to leave a legacy to your favorite charity, your donation can help improve lives. Contact your Farm Bureau wealth management advisor to find out how charitable giving fits into your financial plan.