Charity Giving, Cash vs. Goods

Why the Receipt Matters as Much as the Gift

When we’re generous, we like to also get the tax deduction that goes along with our charitable gifts. Nothing wrong with that.  If you drop off some clothes and an old recliner at the thrift store, put cash in the plate at church, write a check for a youth ballpark fundraiser, or donate your old farm truck to a charity, you’ve given a gift that is possibly tax deductible.  These are gifts, real gifts, and all the IRS requires is…the paperwork to match the generosity.

What you give and how you give it determines the deduction

Cash and noncash gifts follow different rules as far as the value of the donation, but both require paperwork to get the deduction.  You don’t have to send it to the IRS with your return, but you do have to provide it if they ask. 

Cash gifts are simple – every transaction will probably have a bank record of some sort (canceled check, bank or credit card statement), or a written receipt from the charity showing the name of the charity, the date, and amount of the gift.  However, cash tossed into the plate, with no receipt, is not deductible.

Cash gifts of $250 or more also need a written acknowledgment from the charity.  It doesn’t have to be a separate receipt for each gift.  A year-end statement works, as long as it lists each gift of $250 or more separately, rather than just a single total for the year, and says whether you received anything in return.  A good example of this is church offerings, where you may have several gifts throughout the year.

 And the timing of the gift matters, too.  Your check counts on the day that you mail it, not the date the charity receives it or cashes it.  Good news for last-minute givers on December 31.

Noncash gifts are a little different, and sometimes difficult to value.  Fair Market Value is what the IRS requires for items or collections of items of less than $250.  It’s not the price you paid for an item, and not what your insurance replacement value would be.  It’s the price a willing buyer would pay a willing seller.  Think of thrift store value, which is a good valuation for clothing and household items.  Keep in mind – you still need the receipt from the charity, with name, date and location and a description of the goods.

If the value of a single noncash gift is $250 or more, you will need a receipt similar to a cash receipt – with a specific description of what was given.  The charity’s receipt describes the item but doesn’t put a value on it; setting the value is up to you.  Vehicles, like that old farm truck, are a special case.  If it’s worth more than $500, your deduction is usually limited to what the charity sells it for, which the charity reports to you on Form 1098-C, and no appraisal is needed.  For other larger, more valuable items, such as machinery, jewelry, or real estate, you may need a qualified appraisal if the value is over $5,000 (except publicly traded stock, no appraisal needed since there is a public market). 

New for 2026

Beginning in 2026, you can deduct up to $1,000 ($2,000 for married filing jointly) for cash donations made directly to qualified charities, even if you take the standard deduction.  Gifts of property and gifts to donor-advised funds don’t count toward this one.  So it’s worth the effort to get the receipts.  If you itemize, there is a new limit as well:  only charitable gifts above 0.5% of your Adjusted Gross Income are deductible.  Example:  AGI of $100,000 means the first $500 of gifts produces no deduction.  This floor does not apply to the $1,000/$2,000 deduction for those who take the standard deduction.  And another limit to your total cash charitable gifts is 60% of your AGI, though this limit was already in place and just made permanent in the One Big Beautiful Bill Act.

Two smart strategies

1.       Qualified Charitable Distributions (QCDs):  if you’re 70 ½ or older, your IRA custodian can send money directly to a charity.  Up to $111,000 per person can be distributed without being counted as income, but it will be counted toward the required minimum distribution, so it lowers your AGI. The gift must go directly from the IRA custodian to the charity.

2.       Donor-advised funds (DAFs):  you can give to a DAF and you get to take the deduction in the year that you give, then recommend grants to your favorite charities over later years.  You will need a written acknowledgement from the sponsor of the DAF.  You can give what you would normally give over a two or three year period all into one year, to clear the new 0.5% hurdle, then take the standard deduction in the following years.  This is called bunching.  A DAF lets you bunch your deduction while your charities still get steady gifts every year.

Common mistakes to avoid

1.       Cash in the plate with no envelope, check or receipt.

2.       No written acknowledgement for $250+ gift.

3.       Overvaluing used clothing and household items (cost is not value).

4.       Taking an IRA distribution and then donating, rather than QCD.

5.       Giving to individuals (GoFundMe, relatives, friends) and trying to deduct. Check the IRS Tax Exempt Organization Search.

Your year-end checklist

1.       Gather your 2026 giving records, while it’s easier to ask a charity for a missing receipt.

2.       Planning a large gift, or giving a vehicle, stock, or money from your IRA?  Talk to us (or your tax preparer) before you give, not after.

This article is general information, not tax or legal advice. Your situation depends on your specific facts. Please talk with us before making a major charitable gift.