In Greek, the word philanthropy means love of humanity. Today, philanthropy means generosity in all its forms and is often defined as giving gifts of time, talent and treasure to help make life better for other people. You can practice philanthropy by making gifts to a cause you believe in. 

Charitable giving is defined as the act of voluntarily providing personal resources—such as money, goods, or time—to causes or organizations that work for the public benefit. By thoughtfully selecting organizations, considering various methods of giving, and understanding the associated tax implications, you can maximize the effect of your generosity. 

Types of charitable giving 

Monetary donations: The most common form of charitable giving, providing essential funding for nonprofit organizations to carry out their missions effectively. In-kind donations, which include the contribution of goods such as clothing, food, or medical supplies, can also be made and distributed directly to those in need. 

Volunteerism: Donating your time and skills to charitable organizations can be just as effective as financial contributions, especially for those nonprofits with limited resources. All nonprofits rely on charitable contributions to sustain their operations and advance their missions. Your donations help them fund their essential programs, expand outreach, and increase effect.

Before deciding how to distribute your support, define your mission. Establish a personal giving mission statement to keep your focus on causes that align with your values, helping you make intentional and meaningful contributions. 

If you’re unsure about which charitable organizations meet your needs, investigate charities to ensure they are trustworthy and use funds effectively. Resources like Charity Navigator, GuideStar, and GiveWell can provide you with valuable insights into nonprofit operations and their financial health.

Your charitable giving can be as simple as donating money to a local charity or as involved as establishing a foundation to address specific social issues. Whether directed toward alleviating poverty or aiding disaster relief efforts, charitable acts are rooted in compassion and a commitment to making a difference. 

Any property you donate to a nonprofit organization can be deducted at fair market value. However, items such as works of art or investments that have appreciated in value may be subject to additional rules for deducting the donation. Noncash property donations that are worth more than $5,000, for example, require an appraisal of the property that affirms its value. “Trust me” won’t work.

If you intend to claim deductions for your charitable contributions, keep a record of each donation. This is required for donations of $250 or more. For donations that are less than $250, the IRS requires that you keep canceled checks or other records.  

You must itemize your income tax deductions on Schedule A to take charitable deductions. The limit for cash donations is 60% of your adjusted gross income. For donations of property, the deduction limit is 50%, 30%, or 20% of your AGI, depending on the type of property donated.

If you itemize deductions, you can deduct charitable contributions up to a certain amount based on your AGI and the type of donation; cash versus appreciated securities. By bunching your charitable contributions in one year, you can increase your itemized deductions and lower your taxable income. Bunching charitable contributions is the practice of making larger-than-normal charitable donations in one year to maximize the tax benefits. This can be done if you're on the fence between taking the standard deduction or itemizing your deductions on your tax return.  

If you're not itemizing your deductions and you've reached the age of required minimum distribution, you may want to consider donating your RMD from a traditional IRA, inherited IRA, Savings Incentive Match Plan for Employees IRA, or Simplified Employee Pension IRA, to a qualified charity through a qualified charitable distribution.  

Tax treatment of contributions

For 2025, the annual gift tax exclusion is $19,000 per recipient. This means you can give up to $19,000 to as many individuals as you want in 2025 without having to pay any gift tax or report the gifts on the IRS Form 709 gift tax return. 

Here's a breakdown of key points:

1. Annual exclusion:

• Individual limit: During the calendar year, you can gift up to $19,000 to as many people as you wish.
• Married couples (gift splitting): Married couples can effectively double the annual exclusion by electing to split their gifts. This means a married couple can gift up to $38,000 to each individual in 2025—again, without triggering gift tax reporting. 

2. Lifetime gift and estate tax exemption:

• 2025 limit: Your lifetime gift and estate tax exemption is $13.99 million for 2025.
• Unified credit: The gift and estate tax exemption is also known as the unified credit.
• Taxable gifts: You won't owe gift tax until your lifetime taxable gifts exceed this $13.99 million limit per recipient. 

It's important to note that the increased federal estate and gift tax exemption of $13.99 million enacted by the 2017 Tax Cuts and Jobs Act is scheduled to expire on Dec. 31, 2025.

Unless Congress takes action to extend or modify it, the exemption will revert to its pre-TCJA level of $5 million, adjusted for inflation, on Jan. 1, 2026.

Also note that the gift tax generally does not apply to gifts to qualified charities. 

• Gift tax exemptions: The federal gift tax does not apply to gifts made to qualified charities. These gifts don't count against either your annual gift exclusion or your lifetime gift and estate tax exemption.
• Donations to qualifying charities: If you itemize deductions, you can generally deduct your gifts to qualified 501(c)(3) organizations on your income tax return. Check with your tax advisor as to limits.
• Examples of qualifying organizations: These can include public charities, private foundations, religious organizations, and other nonprofit entities. 
• To claim a charitable deduction, you must itemize deductions on your tax return using Schedule A.

By understanding the different forms of giving and adopting strategies to maximize their effects, individuals and organizations can contribute meaningfully to the betterment of society.