Should you add to your charitable donations before the end of the year? From a tax perspective, it generally depends on whether you expect to itemize deductions this year or if you will be claiming the standard deduction. All other things being equal, it makes sense to “bunch” donations in the tax year it does you the most tax good.

For instance, if you will definitely be itemizing deductions in 2021, go right ahead and make extra donations in December. Conversely, if you are absolutely certain you will not be itemizing this year, you might postpone large donations to 2022.

Details: Generally, you can deduct the full amount of monetary contributions made to qualified charitable organizations, up to a stated limit for the year based on adjusted gross income (AGI). Any excess may be carried over for up to five years.

Under prior law, the annual limit was 60% of AGI for monetary donations made from 2018 through 2025. But Congress increased this limit to 100% of AGI for 2020 and subsequently extended it through 2021. This gives charitable donors plenty of flexibility.

Deductions are not automatic. You must provide a bank record or written word communication from a qualified charitable organization, showing the following.

  • The amount of the contribution;
  • The date the contribution was made; and
  • The name of the charitable organization receiving the contribution.

As a result, you probably cannot deduct the few dollar bills you toss into a kettle in front of a store around the holidays. Conversely, large donations may be substantiated by bank or credit card statements. Furthermore, you must secure a written acknowledgment from the charity for monetary gifts of $250 or more.

Make sure you obtain the required acknowledgment by the earlier of the date you file your 2021 tax return or the return due date (plus any extensions).

Note: For donations of appreciated property, deductions are limited to a lower threshold of 30% of AGI.  However, if you donate property that would have produced a long-term capital gain had you sold it instead—in other words, you have owned it more than one year—you can write off the property’s fair market value on the donation date. Otherwise, the deduction is limited to your basis (i.e., your cost) in the property.

In addition, the property must be used to further the charity’s tax-exempt function. For instance, if you donate a sculpture to a museum, it must be displayed where the public can easily view it.

Final words: If you do not expect to itemize in 2021, you can still salvage a smaller tax write-off. Congress recently authorized a deduction for monetary gifts made by non-itemizers of up to $300 per filer in 2020. This tax break was extended through 2021. Plus, the maximum deduction for non-itemizers was doubled to $600 for joint filers. At the very least, consider donations before the clock strikes midnight on December 31.