Charitable Giving Tax Benefits: United States vs. United Kingdom

United States – Individual Donors: U.S. taxpayers can deduct charitable gifts only if they itemize deductions (post-TCJA, most donors claim the standard deduction taxpolicycenter.org). For itemizers, cash gifts to qualified charities are deductible up to 60% of adjusted gross income (AGI) (2024 tax law) nptrust.org. Gifts of long-term appreciated assets (stocks, mutual funds, real estate) are deductible at fair market value and avoid capital gains tax; such gifts are limited to 30% of AGI (with a five-year carryforward for any excess) nptrust.org. (For 2020–21 only, CARES/Tax Act raised the cash limit to 100% AGI and allowed a 100% deduction, but these provisions expired after 2021vanguardcharitable.orgvanguardcharitable.org.) Donating appreciated securities directly to a public charity or a donor‐advised fund (DAF) yields an immediate deduction (up to 30% of AGI for property gifts) and no capital gains tax on the appreciated value nptrust.org. A special “above-the-line” deduction ($300 single, $600 joint) for cash gifts was available in 2020–21 for non-itemizersvanguardcharitable.org but ended after 2021vanguardcharitable.org. U.S. donors may also use donor‐advised funds (DAFs): contributions to a DAF (a public charity) generate an immediate tax deduction (60% limit for cash, 30% for appreciated assets) nptrust.org, while allowing the donor to recommend grants over time. (Current proposals would begin to require DAF payouts for private foundations, but no laws have changed yet rsmus.com.) Key points: Only donations to IRS-qualified charities count, and donors must itemize (aside from IRA “qualified charitable distributions” and the expired CARES above-the-line deduction).

United States – Corporate Donors: C corporations deduct charitable gifts up to 10% of taxable income, with a 5-year carryforward for excess irs.gov. (This 10% limit is the standing rule after prior law [TCJA] changes; excess contributions that cannot be deducted may be carried over five years irs.gov.) Corporate gifts reduce taxable profit; any donation that would create or enlarge a net loss is disallowed irs.gov. Donating appreciated assets via a corporation is subject to special basis rules (generally only the asset’s basis is deductible, not full FMV). Unlike individuals, there is no U.S. “Gift Aid”–style credit for companies – contributions are simply deducted pre-tax. (Note: Biden’s FY2025 budget proposed raising the corporate tax rate, which would increase the tax value of deductions, but this is not enacted.)

United Kingdom – Individual Donors: UK donors use Gift Aid, a tax-refund mechanism rather than a deduction. When a UK taxpayer donates cash to a registered UK charity (or CASC), that gift is treated as having had basic-rate income tax (20%) deducted; charities reclaim an extra 25p per £1 donated gov.uk. There is no upper limit on eligible donations as long as the donor has paid sufficient income (or capital gains) tax to cover the claim gov.uk. Higher-rate taxpayers (40%/45%) get additional relief by claiming the difference via self-assessment gov.uk. For example, a £100 gift becomes £125 to the charity, and a 40% taxpayer can claim back £25 gov.uk. (Payroll Giving is another scheme where donations come from pre-tax salary, effectively giving immediate full relief.) Importantly, donations to most foreign charities no longer qualify for Gift Aid relief after April 5, 2024 gov.uk – only UK (and some previously recognized EU/EEA) charities are eligible. UK donors also enjoy tax relief on gifts of assets: giving land, buildings or shares to charity incurs no Capital Gains Tax, and the donor may deduct the gift’s value from taxable income gov.uk. (CASCs can use Gift Aid for cash gifts but not on membership fees.)

United Kingdom – Corporate Donors: UK companies deduct charitable gifts as business expenses. There is effectively no percentage cap: a donation is deductible up to the amount of taxable profit (i.e. it cannot create a loss) charitytaxgroup.org.uk. Charitable giving simply reduces the company’s taxable profits pound-for-pound. Companies do not use Gift Aid (they cannot reclaim tax back as charities would on personal gifts); they simply pay the full donation and claim it as a deduction charitytaxgroup.org.uk. Donated assets (property, equipment) are treated similarly – the company pays no tax on any gain and deducts the asset’s value (subject to usual rules on donated stock etc.). The UK small donations scheme (GASDS) also allows charities to claim 25% on cash/card gifts of £30 or less (up to £8,000 per year), but this is claimed by charities, not donors gov.uk.

Key Differences & Recent Changes: In the US the benefit is an itemized tax deduction (limited by AGI), whereas in the UK it is a tax credit/refund to the charity plus extra relief for higher-rate payers. US individuals are limited to 60% (cash) or 30% (assets) of AGI nptrust.orgnptrust.org, while UK donors face no fixed percentage cap (only that the donation be covered by prior tax paid) gov.ukgov.uk. Corporations face a 10% of income limit in the US irs.gov versus essentially 100% of profits in the UK charitytaxgroup.org.uk. Both systems encourage donating appreciated stock or property: US donors get a full fair-market-value deduction and avoid capital gains tax nptrust.org, and UK donors similarly pay no CGT and deduct the gift’s value from income gov.uk.

Recent policy shifts include the expiration of U.S. CARES‐Act incentives (the 100% AGI deduction and $300/$600 above-the-line provision ended in 2022)vanguardcharitable.orgvanguardcharitable.org, and ongoing proposals (e.g. requiring DAF payouts for foundations rsmus.com). In the UK, the cut in the basic rate (20%→19% as of April 2024) will reduce Gift Aid top-ups (from 25p to ~23.5p on the pound) cafonline.org. Also, from April 2024 donors can no longer claim Gift Aid on most donations to charities outside the UK gov.uk. (No major overhauls have yet been enacted, but charities are lobbying to expand Gift Aid small-donation limits and adjust to tax-rate changes.)