How to Deduct Goodwill Donations (Don’t Lose Your Receipt)
Cleaning out your closet can lower your tax bill, but the rules have tightened significantly for 2026. Under the new tax law, a 0.5% AGI Floor has been introduced, meaning the first portion of your donations provides zero tax benefit. Combined with the increased Standard Deduction ($32,200 for couples), claiming these deductions is harder than ever. Here is how to calculate the new limits and determine if itemizing is worth it.
1. The Rule: The 0.5% AGI Floor
Donations are no longer fully deductible from the first dollar.
Example: You earn $100,000 (AGI). The floor is $500 (0.5%).
✅ You donate $400 → $0 Deductible (Below floor).
✅ You donate $1,000 → $500 Deductible ($1,000 – $500).
2. Fair Market Value (Checklist)
You must use the “Thrift Shop Value,” not the price you paid when new.
| Item | Original Cost | Deductible FMV |
|---|---|---|
| Designer Jeans | $150.00 | $18.00 – $25.00 |
| Winter Coat | $300.00 | $20.00 – $40.00 |
| Flat Screen TV | $800.00 | $50.00 (Depreciates fast) |
| Used Underwear | $20.00 | $0.00 (Ineligible) |
3. Timeline: The 5-Year Carryover
If your donations are huge (e.g., a car or art), you hit the “50% AGI Limit.” The excess rolls over, but the “0.5% Floor” applies each year.
| Year | Status | Deduction Logic |
|---|---|---|
| Year 1 (Donation) |
Capped | |
| Year 2-6 (Carryover) |
Active | |
| Year 7 | Expired |
4. Strategy: Overcoming the Thresholds
Documentation requirements scale with value.
- $250 – $500: Written acknowledgment from the charity is mandatory.
- $500+: File Form 8283, Section A. (This trigger remains $500 despite the AGI floor).
- $5,000+: Requires a Qualified Appraisal and appraiser signature.
- Benefit Cap: For high earners (top tax bracket), the tax benefit from donations is capped at 35%, even if your marginal rate is higher.
5. Warning: The Standard Deduction Trap
The bar to itemize is higher than ever in 2026.
⛔ Itemize or Zero
The 2026 Standard Deduction is $16,100 (Single) and $32,200 (Married).
- Scenario: You donate $2,000. Your mortgage interest + taxes = $25,000. Total = $27,000.
- Married Couple: Since $27,000 < $32,200, you will take the Standard Deduction. Your $2,000 donation saves you $0 tax.
- Tip: Run the numbers before meticulously tracking every $5 t-shirt.