Charity Auctions     |     21 January 2026

Are Charity Auctions Tax-Deductible? (Updated for 2026)

Clear answers for organizers, donors, and bidders alike

9 minute read

If you’ve ever organized a charity auction, or even just bid on an item, you’ve probably wondered the same thing: “Are charity auctions tax-deductible?” The short answer is yes, but how much you can deduct depends on what you’re giving, what you’re bidding, and how those numbers compare to something called the fair market value (FMV).

This distinction matters more than most organizers realize. Understanding the tax basics of your auction helps you explain the benefits to donors, encourage larger contributions, and ensure everything remains IRS-compliant. It also reassures bidders that their generosity might come with a tax advantage. In short, understanding how deductions work can make your event more appealing and more successful.

Of course, keeping track of values, receipts, and documentation takes time, especially for volunteers. That’s where tools like Silent Auction Pro simplify the process, helping your team focus on what really matters: raising money for your cause.

Read on to learn more about the ins and outs of charity auctions and taxes. 

An introduction to charity auctions and tax deductions

At their core, charity auctions are fundraising events in which donated items or experiences are sold to the highest bidder, with proceeds supporting a nonprofit organization. They can take many forms: traditional live auctions with an auctioneer, quiet table browsing at a silent auction, or online bidding that brings in supporters from anywhere. Some events even combine all three.

The connection between these auctions and tax deductions lies in charitable giving. The IRS allows donors to claim deductions for contributions made to qualified 501(c)(3) organizations. That means both the person who donates an item and the person who buys it could qualify for a tax deduction, but not always for the full amount they give or spend.

That’s because not every dollar exchanged at a fundraiser is considered a pure donation. The IRS looks at how much value a donor or bidder receives in return, and that’s where the concept of fair market value, or FMV, comes in. FMV is the standard the IRS uses to determine which portion of a gift or bid counts as charitable. Once you understand that piece, the rest of the rules start to make more sense.

What is fair market value (FMV)?

Fair Market Value sounds intimidating, but it’s actually straightforward. It’s the price an item would reasonably sell for on the open market or the amount a willing buyer would pay a willing seller for the same thing under normal conditions.

For donors, FMV determines how much they can deduct for the items or services they give to an auction. If an artist donates a painting worth $500 to a nonprofit’s silent auction, that $500 is generally the deductible amount, assuming the organization is eligible to receive tax-deductible donations.

For bidders, FMV works in the opposite direction. Their potential deduction is based on how much they pay above an item’s fair market value. So if that same painting sells for $700, the bidder may be able to deduct $200. That’s the difference between what they paid and what the artwork was worth on the open market.

This concept keeps donations fair and transparent. It ensures that people aren’t deducting the full price of something they also received tangible value for, while still rewarding generosity that goes beyond the item’s actual worth.

Because these values affect both donors and bidders, documentation is essential. Every participant should receive a clear receipt that lists the item, its fair market value, and the total payment amount. Silent Auction Pro makes this part effortless, automatically tracking FMV within item listings and including it in donor and bidder receipts. That accuracy protects your organization and gives supporters confidence that their contributions are being recorded properly.

Which donations are eligible for tax deductions?

Not every contribution made at a charity auction qualifies for a tax deduction. To count, the donation has to go to a qualified 501(c)(3) organization recognized by the IRS. That’s the key factor that makes a gift deductible. Once that’s established, the type of contribution determines how the rules apply.

Eligible donations typically include items or services given to the auction, cash contributions, and what’s called “overbids.” Overbids are the extra amount a bidder pays above an item’s fair market value. If a local restaurant donates a dinner-for-two certificate, that donation is usually deductible for the restaurant, assuming the nonprofit qualifies. Likewise, if a bidder pays $300 for a certificate valued at $200, that $100 difference may be deductible for them.

Some contributions, however, don’t qualify. Donations made directly to individuals rather than registered charities aren’t deductible. The same goes for payments in which a donor receives something equal to what they paid; there must be a charitable component for the IRS to consider it a donation.

It’s also important to clarify that donating time or services doesn’t count toward a deduction. For example, a graphic designer who donates a free branding session can’t deduct the value of their hours, but they can deduct the cost of materials or supplies used in providing it. Understanding these distinctions helps both donors and organizers stay compliant and confident during tax season.

How bidders can claim tax deductions

For bidders, the tax benefit of participating in a charity auction depends entirely on how their winning bid compares to the item’s fair market value. The IRS only allows bidders to deduct the portion of their payment that exceeds the item’s listed value.

Here’s how that works in practice. Suppose a weekend getaway package is valued at $800. If you place the winning bid at $1,000, the $200 difference between your payment and the fair market value may qualify as a charitable deduction. If you win with a bid of $750, there’s no deductible amount because you didn’t pay more than the item was worth.

To claim these deductions, bidders must itemize their deductions on their federal tax return rather than take the standard deduction. The IRS requires clear proof of the donation and its fair market value, which is why the organizer’s documentation is so important.

Every winning bidder should leave the event with a detailed receipt that lists the item, its fair market value, and the amount paid. This record gives donors peace of mind and reinforces their trust in your organization. Silent Auction Pro simplifies this step by automatically including FMV details in bidder receipts, so you never have to worry about missing information.

How donors benefit, and what they need from organizers

Donors play a huge role in making charity auctions possible, and they often qualify for tax deductions for the items or funds they contribute. For individuals, the deductible amount usually equals the item’s fair market value, provided it’s given to a qualified nonprofit. For businesses, the rules can vary slightly, but many can deduct the cost of donated inventory or promotional items as a charitable contribution or business expense.

Where organizers make the biggest difference is in documentation. To help donors claim their deductions properly, provide an acknowledgment letter or receipt that includes a description of the donated item, its estimated fair market value, your organization’s name and tax-exempt status, and a note confirming whether the donor received anything in return. If nothing was exchanged, that should be clearly stated; it helps donors prove their contribution qualifies as tax-deductible.

These acknowledgments do more than check a compliance box. They show appreciation, build donor trust, and make your auction look professional. 

The maximum you can deduct for donations

There’s often confusion about just how much someone can deduct in a given year, and the truth depends on the type of contribution and the donor’s income level. Generally, individuals can deduct up to 60% of their adjusted gross income (AGI) for cash donations made to public charities, including nonprofits that run charity auctions.

Non-cash contributions, such as donated artwork, merchandise, or services tied to tangible goods, have different limits. Depending on the type of property and the organization receiving it, deductions may be capped at 30% or 50% of AGI. If someone exceeds the limit in a single year, the excess can usually be carried forward and deducted for up to 5 additional years.

Because these limits can change with IRS updates or the specific nature of a gift, it’s always best for donors to double-check their eligibility with a tax professional. For organizers, the most helpful thing you can do is provide accurate records. Detailed receipts showing fair market value and clear descriptions of items donated give tax preparers everything they need to confirm eligibility and maximize deductions.

Can you deduct charitable donations on income tax?

Whether you’re a bidder, a donor, or someone simply giving cash during an event, charitable deductions only count if they’re properly reported on your income tax return. To qualify, donors must itemize their deductions on Schedule A of their federal return. That means listing out all eligible expenses, including charitable gifts, instead of taking the standard deduction.

If you take the standard deduction, you can’t claim additional charitable write-offs at the federal level. However, some states offer separate charitable deduction or credit programs, so it’s worth checking your state’s tax rules to see if you still qualify for a benefit.

What really matters across the board is documentation. Donors and bidders alike should have a clear record showing who received the contribution, what was given, and how much of it qualifies as a deductible contribution. That’s why organizers need to issue detailed, IRS-compliant receipts for every auction purchase and donation. 

Record-keeping and compliance tips for organizers

Good record-keeping doesn’t just protect your organization; it also builds trust with donors and ensures everyone gets the tax benefits they deserve. Every charity auction should maintain accurate records of all donated items, their estimated fair market values, and the donor details for each item. 

After the event, organizers should issue acknowledgement letters and receipts to both donors and bidders. Each document should list the item’s description, its fair market value, and a note on whether any goods or services were exchanged in return. Bidders’ receipts should also show how much they paid beyond the item’s fair market value, so they know exactly what portion could be deductible. If you thought Silent Auction Pro’s organizational and communication tools were powerful, you’ll be amazed by how well this platform helps maintain excellent records, send receipts, and keep everything organized. 

It’s also a good idea to review IRS Publications 526 and 561, which outline charitable contribution rules and explain how to determine fair market value. These guidelines help nonprofits stay compliant and maintain transparency with supporters.

Turning paperwork into peace of mind

Tax tracking doesn’t have to be a tangle of spreadsheets and sticky notes. With Silent Auction Pro, many of the most tedious parts of managing a charity auction are handled automatically, giving organizers and volunteers one less thing to worry about.

Every item entered into the system includes a field for its fair market value, ensuring that bidders, donors, and staff have clear, accurate information from the start. Once the event ends, the platform automatically generates receipts that list each item, its FMV, and the total payment amount, exactly what donors and bidders need for their tax records. Those same details can be exported as reports for bookkeeping or audits, keeping everything organized and compliant.

Silent Auction Pro also provides templates for bidder and donor thank-you notes that include the fair market value and the amount bid, so no one has to start from scratch when sending post-event communication. It even includes CRM reports that are easily downloaded and imported to your CRM. 

The result is simple: less stress, more accuracy, and complete confidence that your donors’ generosity is being recorded properly.

Keeping generosity easy and transparent

Charity auctions are often one of the most inspiring parts of fundraising. They combine giving with community, generosity with fun, and yes, they can also bring real tax advantages for everyone involved. The key is understanding how fair market value affects deductions and keeping accurate, transparent records from start to finish.

When organizers handle these details clearly, donors give more freely and bidders participate with confidence. It shows that your organization values integrity as much as impact. With the right support tools in place, managing those details doesn’t have to be complicated.

Silent Auction Pro was designed to make that part effortless, from recording FMV and issuing receipts to maintaining compliance-ready reports behind the scenes. You get accuracy without the anxiety, and your donors get the confidence that their contributions are being managed responsibly.

If you’re ready to simplify the tax side of your next auction and free up more time to focus on what matters, your mission, request a free demo of Silent Auction Pro and see how easy it can be to combine compliance with confidence.