Charitable Deductions 2025: Rules for Substantiating Donations

For many of us, supporting the causes we care about is one of the most rewarding parts of financial success. But when tax season rolls around, that generosity needs to be backed up by paperwork if you plan to itemize deductions on your 2025 individual income tax return.

While the spirit of giving is what matters most, the IRS requires specific proof that your donations actually happened. Without proper substantiation, even the most legitimate gifts can be disallowed during an audit. The rules vary depending on what you gave and how much it was worth, but getting it right now can save you a significant headache later.

Substantiating Cash Donations

The rules for cash gifts—which include donations made by check, credit card, or electronic funds transfer—depend largely on the amount.

If you made a cash gift of under $250, the documentation requirements are relatively straightforward. A bank record, such as a canceled check, bank statement, or credit card statement, is usually adequate. However, there is a catch: if you received something in return for your donation (like a gala dinner or merchandise), you generally must reduce your deduction by the value of those goods or services. In this scenario, you also need a "contemporaneous written acknowledgment" from the charity.

For any single cash donation of $250 or more, a bank record isn't enough on its own. You must obtain a formal written acknowledgment from the charitable organization. This document needs to state:

• The amount of the donation.
• Whether you received any goods or services in exchange for the gift.
• If you did receive something, a description and good faith estimate of the value of those goods or services.

The "Contemporaneous" Requirement

One area that frequently trips up taxpayers is the timing of this documentation. The law requires a "contemporaneous written acknowledgment." This doesn't mean you need the letter the same day you donated, but you do need it by the earlier of:

1. The date you actually file your tax return, or
2. The due date of your return (including extensions).

This timing is critical. If you file your return without having the letter in hand, you cannot go back and get it later to fix a mistake if audited. If you made a donation last year that requires this acknowledgment but haven't received it yet, reach out to the charity immediately—before you file your 2025 return.

Substantiating Property Donations

Donating goods, stock, or other property is a tax-smart strategy, but it comes with its own set of paperwork hurdles.

For property gifts worth $250 or more, you generally need that same contemporaneous written acknowledgment from the charity. However, instead of listing a dollar value for the donation, the charity simply needs to provide a description of the property. Just like with cash, the acknowledgment must state if you received any goods or services in return.

As the value of the donated property increases, so does the paperwork:

• Over $500: You must attach a completed Form 8283, "Noncash Charitable Contributions," to your return.
• Over $5,000: You generally must obtain a qualified appraisal and attach an appraisal summary to your tax return.
• Exception: Donations of publicly traded securities generally do not require an appraisal, even if they exceed the $5,000 threshold.

Plan Your Giving Strategy

Navigating IRS regulations shouldn't discourage you from being generous. It just means you need a solid strategy to ensure your good deeds are recognized on your tax return. Many other rules and limits can affect your charitable deductions, depending on your adjusted gross income and the type of charity you support.

We can help you determine exactly what you can claim on your 2025 return and help you plan a tax-smart charitable giving strategy for 2026 and beyond. By understanding the rules, we can ensure your philanthropy is as effective for your financial health as it is for the organizations you support. Contact us today.