Tax Hacks: 5 Smart Ways to Increase Your Charitable Write-offs

If you itemize deductions on your tax return, one of the best ways to save money and do a lot of good at the same time is to donate to charitable organizations. While it's a well-known fact that charitable contributions are usually tax-deductible, there are some strategies you can use to maximize the value of yours.

Here are five tips in particular that can help you boost your deductions and make sure you won't have any issues with claiming them.

1. Donate items around your home that you don't need

One common misconception is that you can only deduct monetary donations. You can also donate property to a charitable organization and deduct their estimated value on your taxes. For example, did you clean out your closet and have a bunch of clothes that don't fit or you almost never wear? Did you upgrade your coffee maker, but the old one still works fine? Did you get new living room furniture and now have an old couch sitting in your garage?

These are just some of the items you could donate. Be sure to get a written acknowledgement from the charity, and it doesn't hurt to take some photos of the items you're donating as well (just in case you need them). If you estimate the value of your donation at more than $500, you'll have to fill out IRS Form 8283 as well.

2. Don't forget about mileage

Unfortunately, you cannot deduct the value of your time if you volunteer for a charitable cause. However, you can take a deduction for the expense of driving there and back. If you get written confirmation from the charity documenting your service, you can deduct your actual vehicle expenses or $0.14 per mile. In most cases, the actual expenses (gas, parking, etc.) result in the higher deduction, though the flat mileage rate is much easier to work out for the deduction.

3. Be strategic about timing

Charitable deductions can only be taken in the year they were made. In other words, you can't donate to charity in February 2024 and claim the deduction on your 2023 tax return you're filing your taxes this year. So one of the best ways to maximize your charitable deduction is to be strategic.

If you end up in a relatively low tax bracket this year and typically donate a certain amount of money, it might be a good personal finance move to set it aside until Jan. 1 of next year. Conversely, if you anticipate being in a higher tax bracket this year than in future years, it could be a smart strategy to get aggressive with your donations.

4. Get a receipt

In order to claim a charitable deduction, you need to obtain proof of your contributions. I mentioned this briefly in the context of donating property, but cash donations of $250 or more require written confirmation from the charity. If you donated less than $250, a receipt or bank statement is sufficient.

As a general rule, the larger your charitable deduction is, the higher the probability that the IRS will want to see proof. This is especially true if your donation was high relative to your income. In other words, if you made $60,000 last year and donated $10,000 of it to charity, you should absolutely take the deduction when you file your tax return -- but make sure you can back it up.

5. Donate stock you own

You don't just have to donate cash or physical items to get a tax break. If you donate assets you own that have gone up in value, you can get a double tax benefit.

Consider this example. Let's say you paid $1,000 to buy stock several years ago, and now that stock is worth $3,000. If you were to sell that stock today, you'd have a $2,000 taxable gain to report on your taxes. However, if you donate the stock to your favorite charitable organization, you don't have to pay any capital gains at all and you get a tax deduction for the donation equal to the stock's full market value.

The bottom line

Charitable giving can be a great way to support the causes you're passionate about while saving money on your taxes at the same time. By using these strategies, you can make your deductions higher and more valuable, and make sure you'll be in a good position to document them if the IRS asks.