Are Contributions to Nonprofit Schools Tax Deductible?
Taxpayers are allowed to claim a deduction for donations they make to qualified organizations.
The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.
Key Takeaways
- You can deduct cash and the value of property you donate to a qualified nonprofit school.
- If you donate property, you need to assess its fair market value on the date you make the donation.
- You are required to reduce the value of your contribution by the value of any gift or benefit you receive from the school in return for your contribution.
- You may have to reduce your deduction for donations to a nonprofit school by the value of any gift or benefit you receive from the school.
Charitable deductions
The Internal Revenue Code allows taxpayers to claim a tax deduction for donations they make to qualified organizations. A qualified organization includes most nonprofit schools that operate exclusively for educational and literary purposes. However, a donation may not be tax deductible if the school substantially engages in other activities unrelated to charitable, scientific, humanitarian, or religious purposes.
If you donate to a qualified nonprofit school, you can claim either a:
- below-the-line deduction for charitable contributions (starting with the 2026 tax year)
- itemized deduction for charitable contributions
The first deduction is available for people who take the Standard Deduction, but it's only allowed for up to $1,000 of cash donations to a qualified organization ($2,000 for married couples filing a joint return). The second deduction is available for people who itemize, and it comes with certain limitations of its own.
Valuing your school donations
The IRS allows you to deduct cash or the value of property you donate to a qualified nonprofit school during the year. However, you can only claim the itemized deduction for charitable contributions if you donate property, since the deduction for non-itemizers is only allowed for cash donations.
Contributions of property require you to assess its fair market value on the date you make the donation. Various valuation methods are used, depending on the type of property. Although the IRS does not prescribe the methods, it warns taxpayers that the value has to accurately reflect the price that the property would sell for on the open market. For example, if you contribute used clothing to the school, the guidelines suggest you check with thrift shops in your area to determine what they charge for similar articles of clothing. You may also obtain the fair value by referencing various online resources for similar clothing in comparable condition.
TurboTax Tip:
For cash contributions of $250 or more, the IRS requires that you have written acknowledgement from the charity in order to deduct the donation on your tax return.
Benefits you receive from the school
The school may provide you with a gift or other benefit to acknowledge your generosity. If so, you may have to reduce your donation by the value of any gift or benefit you receive from the school. If the gift is a small token of appreciation with minimal value, you need not reduce your deduction. For example, receiving a plaque with your name on it has little value to anyone but you, so you would not be required to reduce your deduction, regardless of what the school paid for the plaque. However, if you receive a $100 gift certificate to a local restaurant, you'll need reduce the deduction by $100.
Recordkeeping and penalties
The Internal Revenue Code authorizes the IRS to assess penalties on taxpayers who overvalue charitable contributions. The penalty is 20 percent of the underpaid tax that results from a valuation that exceeds 150 percent of its true value. The penalty increases to 40 percent for valuations that exceed 200 percent.
Additionally, the IRS can disallow a deduction for failing to retain or submit proper documentation. All contributions, whether cash or property, require you to maintain a record with a description of the contribution, the organization receiving the donation, and if in cash, a bank statement, canceled check, or receipt. For cash contributions of $250 or more, the IRS requires that you have written acknowledgement from the charity in order to deduct the donation on your tax return.
Donations to scholarship granting organizations
Beginning with the 2027 tax year, a non-refundable tax credit of up to $1,700 is available for cash donations to certain "scholarship granting organizations" (SGOs) that use the money to fund scholarships for elementary or secondary school students in the SGO's state. However, only donations to SGOs in participating states qualify for the credit.
Since tax credits are generally better than tax deductions, this new credit may help you reduce your tax bill even more by indirectly donating to a nonprofit school through an SGO.
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