Anyone who’s a fan of holiday movies is no doubt familiar with Charles Dickens’ “A Christmas Carol.”
The story is about how Ebenezer Scrooge, a miserly old man who swims through hoards of gold coins in some retellings, is transformed into a generous soul after he receives a visit from four spirits on Christmas Eve.
While most of us probably hope we’re not as frugal as Scrooge, we still enjoy a good deal when we see one. That’s why his dramatic change of heart holds a critical tax lesson: The most powerful way to lower your tax bill this season may be to give.
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By employing this “Scrooge Strategy,” you can donate gifts, clothes, and other old “junk” to squeeze out one last tax break before December 31. It might not be mounds of gold, but hey — every bit helps, right?
This article covers the federal income tax deduction. States may offer some variation of the charitable contribution deduction, if any. See your state’s Department of Revenue or Taxation website for more information.
Charitable donations for the ‘Scrooge’ strategy
We all have those items piling in the back of our closets waiting to be used. So why not donate them?
Not only will you be helping someone in need, but you may be able to claim the charitable donation deduction on your 2025 federal income return if you itemize (rather than claim the standard deduction).
Yet before we dive into the types of donated goods that qualify for a potential tax break, we’ll first need to lay out some ground rules. Namely, the IRS rules on the eligibility of donated goods employing the “Scrooge” strategy.
- The item must be donated to a qualified tax-exempt 501(c)3 organization (e.g., Goodwill, Toys for Tots, churches, etc.). You can verify an organization’s tax-exempt status via the IRS Tax Exempt Organization Search tool.
- Donated goods must be in “good used condition” or better to be deductible. Nothing of poor quality will be accepted as a tax deduction (unless you can prove your item is worth more than $500 by a qualified appraiser).
- The deductible amount of your donated goods is equal to the fair market value (FMV) at the time of donation, not what you originally paid. This means that if you’re donating to a thrift or consignment shop (like Goodwill), it’ll be for the amount they can sell the item.
You should keep detailed tax records of your donated goods. For example, if you donate $100 worth of old mugs to the Salvation Army, you’ll at least want a description of the items, their value, and how that value was determined.
Written acknowledgement is a requirement for any non-cash goods donated that are worth $250 or more. You can often get this written notice by asking the organization you donated to for proof of donation.
Lastly, any one item or group of items worth over $5,000 must be appraised by a qualified appraiser to confirm their value (though most of us likely don’t have $5K lying around our closets, do we?).
Note: Collectibles, fine art, and other items that are valued over $5,000 may only be deducted based on FMV if the charity uses the item in a related way. So, for example, if you donate a painting to a museum that uses the art on display, that could be deductible at FMV. Otherwise, your deduction may be limited to your original cost basis in the item.
Charitable deduction deadline checklist
Just as Scrooge awoke on Christmas, relieved it was not too late to change his miserly ways, you also have time to make a non-cash contribution to charity before year-end. But you’d better hurry. The deadline to contribute for the 2025 tax year is December 31.
Here’s a checklist of items you may find in your attic or closet that could count toward the federal charitable tax deduction:
|
Categories |
Examples |
|---|---|
|
Antiques |
Vintage everyday items (kitchenware, furniture, militaria, rare books, etc.) |
|
Books & Toys |
Gently used books, educational toys, etc. |
|
Clothing & Linens |
Gently used shirts, pants, coats, towels, sheets, etc. |
|
Collectibles |
Real silverware, coins, jewelry, stamps, high-value toys, rare memorabilia, etc. |
|
Electronics |
Working computers, TVs, etc. |
|
Fine Art |
Paintings, sculptures, textiles, limited edition or original prints or drawings, etc. |
|
Furniture |
Good condition tables, sofas, chairs, etc. |
|
Household Goods |
Kitchenware, small appliances, tools, lamps, etc. |
|
Sporting Goods |
Old bikes, camping gear, exercise equipment, etc. |
While individually the items may not be worth much, the total value of your donated goods could quickly add up. And if you’re on the cusp of claiming the itemized or the standard deduction for the 2025 tax year, any extra donated goods could push you to itemize for a higher tax break. This could be particularly important given that new charitable deduction rules next year will further limit non-cash charity deductions.
Starting in 2026, all itemizers will be subject to a new deduction floor of .5% of their adjusted gross income (AGI). Any charitable contributions (including non-cash) below this threshold will be non-deductible.
Note: Appreciated stock, real estate, and other items that are typically not stored in the back of a closet or attic were excluded from this list. However, consult with a qualified tax professional before making a high-value donation, as different rules and tax planning considerations may apply.
Tax deduction for a charitable donation
Although we covered eligibility rules and examples of what could qualify for a charitable contribution tax break, some additional IRS guidelines limit how much you can claim on your federal income return for your non-cash charity deduction.
- Ordinary property held less than a year (like clothing, household items, etc.) is limited to your cost basis and 50% of your AGI.
- Appreciated long-term capital gain property (like artwork, jewelry, etc.) is limited to FMV and 30% of your AGI.
- If you donate long-term property to a private foundation, that’s generally limited to cost basis and 20% of your AGI.
However, there may be a silver lining: If your donation exceeds your AGI for the tax year, the leftover amounts may be carried over into the future, up to five tax years. So if you plan to itemize again, your non-cash contributions could qualify on next year’s return — but even if they don’t, your charitable intentions will surely be appreciated by the charity of your choice.
