This is How You Can Reap The Benefits of Donating to Your College

Philanthropic giving to colleges and universities in the United States is a big business. After all, college donations totaled $58 billion in the 2023 fiscal year, per a report from the Council for Advancement and Support of Education. Yet, the bulk of these came from organizations. Contributions from individuals actually went down 10% year over year. 

But at universities where giving is common, a high percentage of alumni opt to contribute something to their alma mater. At Wellesley College, for example, nearly 50% of alumni donated to the college in 2019, based on a three-year average share. This is on par with statistics from colleges like Williams, Amherst and Bowdoin, according to Statista data. 

While, of course, one advantage of donating to your alma mater is the positive impact you hope to have. However, there is a fringe benefit to allocating some of your savings to the institution from which you graduated — tax deductions. Donations to qualified organizations, like tax-exempt academic institutions, are generally eligible for tax deductions. But before we discuss how best to take advantage of your tax deduction, let’s dive into how college donations work. 

How Do College Donations Work?

Most universities have an established philanthropic program so alumni can contribute funds to their school. Sometimes, they designate exactly where they should go. On Harvard’s giving page, for example, alumni are directed to donate online, through stock transfer, through bank wire or even through a matching employer gift program. The university is also prepared to offer tax information—its site shows the school’s federal tax ID and gives alumni the ability to request their tax receipt form. 

There are certainly big-ticket donors who give substantial amounts of money to schools, But there are also perhaps a multitude who give $50 or $100 to their universities each year, as detailed in this Slate column by Joel Anderson. A 2022 report from Hanover Research showed that 24% of alumni who donated gave less than $100 as their last donation, while only 3% gave $10,000 or more. Although these contributions may seem to lack impact on their face, they once played a large role in how people perceived universities. In fact, U.S. News and World Report’s famed ranking of colleges and universities formerly used alumni giving as a ranking indicator. That, however, ended this year. 

Although U.S. News and World Report may have axed alumni giving as a factor, the site still tabulates data on giving rates at various universities. Data from the 2023 fiscal year showed Princeton University, coincidentally the number one ranked college, had the highest percentage of donating alumni at 46%. Dartmouth College was second, at 36%. These numbers are far higher than the average alumni giving rate of 8%, per a survey of 304 colleges and universities. 

How To Maximize Tax Benefits from College Donations  

Donations are tax-deductible. 

The first and most important way college donations yield tax benefits is that they are tax-deductible. But there are some important things to remember. The school must be a qualified organization, which includes “nonprofit groups that are religious, charitable, educational, scientific or literary in purpose, or that work to prevent cruelty to children or animals,” according to the Internal Revenue Service. You typically itemize deductions on Schedule A (Form 1040). You can make deductions only in the year you make them in cash, per the IRS. The organization details the various dates based on method of contribution, i.e. check or credit card. 

Tax deductions on charitable contributions are generally limited to up to 60% of your adjusted gross income. Depending on certain types of contributions or organizations, these limitations could be even lower, i.e. 30 or 50%. Qualifying organizations listed by their deduction limitations can be found here.

Some states offer tax credits.

If you live in certain states, you may be able to really maximize your charitable deductions with state tax credits. Six states, Iowa, Kentucky, Maryland, Mississippi, Montana and North Dakota, offer tax credits for certain charitable contributions, including to colleges. While tax deductions decrease your overall taxable income, tax credits take money away from your actual tax bill. 

Strategize to get the most tax benefits out of your giving. 

Charitable contributions are generally deducted in the year you give them. So, it’s important to think about what expenses you have coming up and what potential income you have coming in. If you expect to have a big windfall the following fiscal year or sell a home, then you may want to wait to make a big-ticket contribution to your alma mater until then, when your contribution can have more impact on your overall tax bill. 

Always request a tax receipt form. 

We have three small words for you: tax receipt form. You always want a receipt, right? If you give more than $250 and want to claim it as a charitable contribution on your taxes, the IRS asks for written proof. This written evidence must have the name of the organization, the amount of the cash contribution, and a statement that no goods or services were provided by the organization. The donor themselves may need to maintain a written record of the contribution on their end to claim the deduction. 

Tax deductions can also be carried forward. 

If you do end up reaching the limit on deduction percentages vis-a-vis adjusted gross income, there is a possibility of still retaining the benefit by carrying it forward. The IRS allows for a maximum carryover period of charitable contributions of five tax years, per Thomson Reuters. Still, it’s better to save the deduction for sometime in the future than to lose it entirely. 

Other Tips for Donating to Your College

Know where your money is going.

Giving to universities often occurs on an un-earmarked basis, meaning you can’t always be sure where your money is going because you haven’t specified. In fact, according to an advice post by organization Philanthropy Roundtable, “giving officers often steer donors toward unrestricted gifts precisely because they offer maximum flexibility to the recipient institution.”

If you want to be sure your gift targets a specific department, initiative or extracurricular activity, make sure to specify that when you make your contribution. 

Make sure you take an itemized deduction—or know about the universal charitable deduction. 

It’s important to note that you maximize your tax benefits when you take itemized deductions. If you choose not to itemize deductions, Congress allowed for a universal charitable deduction of $300 for cash gifts—$600 for joint fliers—from non-itemized taxpayers in 2020, per the Association of American Universities. But if you are able, taking itemized deductions generally makes the most sense for bigger-ticket philanthropic donors. 

Writer Elizabeth Djinis is a contributor to The Penny Hoarder, often writing about selling goods online through social platforms. Her work has appeared in Teen Vogue, Smithsonian Magazine and the Tampa Bay Times.