Charity at Checkout? Skip Store Donations to Save Money on Your Taxes
To get the biggest tax benefit, wait and make your own donation.
You could be missing out on money from charitable tax deductions if you're not tracking your checkout donations.
Donations to charity at retail store checkouts like Walmart, Target and Walgreens are big money makers. Charities bring in about $600 million every year from donations that shoppers add to their bills when they pay for purchases in stores, according to Engage for Good.
While it's hard to argue against more money for charities, there are some not-so-positive sides to the practice. A new study from marketing professors at Ohio University and University of Dayton found that twice as many shoppers experienced negative emotions from checkout requests for charity compared to those who felt positive sentiments for giving.
Charitable contributions at the checkout could also be costing you more money at tax time. If you itemize your deductions and donate at checkout, it's harder to reap the tax benefits of donating to charity.
Learn how charitable contributions impact your tax refund and who might consider skipping the checkout donation. For more Money Tips, learn the cheapest day for booking flights and how to adjust the amount of money withheld from your paycheck for income taxes.
Why shouldn't I donate money to charity at checkout?
The answer depends on whether you plan to itemize your tax deductions when filing your tax return next April. If you itemize your deductions, your charitable donations can be used to reduce your amount of taxable income.
When you donate money at the checkout counter of a retail store -- usually in the form of "rounding up" a purchase to the nearest dollar amount or a small donation of $1 to $10 -- the money will show up on your receipt and you can claim it as a tax deduction, but you'll need to keep track of a whole bunch of paper or email receipts and research all the separate charity tax identification numbers at tax time.
If you'd like to support the charity being solicited at checkout, consider instead making your own personal donation later via the charity's official website, mailing address or phone number. Then you'll have one easy-to-access record of your charitable contribution, along with the necessary tax identification number and an official reminder from the organization at tax time with your total gift amount for the year.
The downside to this approach? You may never make that donation later. If you're likely to forget about it and you really want to contribute, don't feel bad about giving at checkout. For some people, it's the best -- and easiest -- way to give.
Whose taxes aren't hurt by donations to charity at checkout?
If you take the standard deduction -- which is bumping up 6.9% to $13,850 for single filers in 2023 -- donations at checkout won't affect your tax bill at all. In 2020 and 2021 the IRS allowed filers taking the standard deduction to also deduct $300 in charity gifts, but the rule is no longer in effect.
The taxes for the store that is soliciting charitable donations aren't affected by your donations either. Despite persistent rumors that these companies use your donations to offset their own tax burdens, the Tax Policy Center says that, "your gift has zero impact on the store's income taxes."
What else should I know about charitable contributions and taxes?
Depending on your income, you can generally deduct eligible charitable donations up to 50% of your adjusted gross income. In 2020 and 2021, taxpayers could deduct up to 100% of their AGI, but that expanded deduction expired.
Charitable contribution deductions are reported with Schedule A (Form 1040), which is included in all leading tax software.
Your donations can only be deducted if they are made to organizations that are included in the IRS database of tax-exempt organizations. Cash donations more than $250 require a written acknowledgment from the charity that includes the date and value of the gift. If you donate an item worth more than $500, you'll also need to file IRS Form 8283.
Charitable contributions can be a good tax strategy for lowering your tax burden while supporting causes or organizations that you believe in. The end of the year is a great time to review your gifts to charity so far in 2022 and see if you want to give more to increase your tax deductions.
For more about taxes, learn which states are taxing student loan debt relief and which states are sending out additional child tax credit money this year.