Maximize Your Tax Breaks: The Best Types of Donations to Make

Making a charitable donation to your community benefits those around you and could even lower your taxes. As you’re sorting through your old clothes and managing your budget, think how you can make an impact and give back to your local neighborhoods. Learn more about the different types of donations you can make to get a tax break and save those receipts when you’re filing your return.

1. Monetary Donations

Cash donations are one of the most straightforward ways to earn a tax deduction. Whether you're writing a check, making an online transfer, or donating cash to a registered charity, these contributions are often fully deductible. Keep a record of every financial contribution as even small donations you make can add up and qualify you for a tax break.

2. Clothing and Household Item Donations

If you’re clearing out your home and find extra coats, furniture, or electronics you no longer need, drop them off at your local donation center. Donating gently used clothing and household goods to qualifying charitable organizations can also earn you a tax break. There are also online tools that can help you assess the value of your old items, so you claim the correct amount when filing your taxes.

3. Vehicle Donations

If you have an old car that you no longer drive, donating it may qualify you for a tax deduction. Many organizations accept vehicle donations and sell the cars to fund charitable activities. Your tax deduction value typically uses the vehicle’s selling price or fair market value, but double-check your IRS guidelines for your car’s specific make and model for reliable estimations.

4. Appreciated Assets

Donating appreciated assets, such as stocks or mutual funds, can help you avoid paying capital gains taxes that would apply if you sold them. Along with this, you can still claim a deduction for the full market value of the asset. Especially for those looking for a tax-efficient estate plan, this type of donation allows you to preserve wealth while supporting causes you value.

5. Volunteer Expenses

While your time may not be deductible, expenses incurred while volunteering often are. For example, if you drove to a volunteer activity, you can deduct mileage at the applicable IRS rate. Keep track of these fees and retain receipts to claim the volunteer expenses as a donation.

Throughout the year, as you clean out your house or offer your time to your community around you, preserve the records in a safe place so that you can present them as you file your taxes. Practice these charitable acts and enjoy some tax breaks at the same time.