Hi, J.!
My son is 3, about to be 4, and lemme tell you what I've done the past two Christmases...
You see, his birthday is in February, so we get a lot of toys all at once. Now this requires a bit of build up, so a recommend starting a week before with the news.
I tell my son one of two things, and you can decide what works for you, both have worked for me. Either, "Santa needs your old toys so he can fix them up new and give them to boys that are younger than you, and the more you give him the more new stuff he'll give you next Christmas," or, tell him "there are little boys out there who lost everything they have when the hurricane hit Galveston, and they need toys, even old ones, because they have nothing."
I used the first explanation last year and the second this year.
Reminding him every few days that soon the two of you will be going through his stuff helps to prepare him for it.
Then when you're ready, get a big box, more than one probably. And you go through his stuff, one by one, and say, is this a baby toy?", do you still play with this?", and let him throw anything, ANYTHING, he's willing to part with in the box. You can go through it later yourself and take out things like shoes, or really sentimental items. But bear in mind, it's only stuff, and even if he just got it for Christmas, consider his willingness to part with it so soon.
Hopefully you will be surprised with his eagerness to rid himself of lots of stuff. That or he'll freak out and realize he's got lots of great stuff and doesn't want to part with anything. Go slowly. Don't nag.
This serves two purposes, teaching them giving and purging, and creating space in the room.
My son just grabs stuff and chunks it in these boxes, "Oh, that's a baby toy, I don't want it anymore."
At the beginning of December we got rid of a solid one third of his belongings, that's books, clothes, and toys, and all were donated.
Important also, I think, is to take him along to do the donating. Find somewhere he can walk into and see that other people are giving, a shelter, a food bank, the salvation army, the Women's Center thrift store, and lots of places will give you a tax deduction for donations.
Your next baby will get plenty of his own stuff. Aside from old stuffed animals and homemade baby blankets, I let my son get rid of most anything he wants to. Because it's his stuff. And if we don't do this every winter, by the time he's 7 he'll need two rooms.
Then when we're done, I let him organize his room with what's left in it. I get lots of big baskets or bins or boxes that have lids and we pick what goes in where, categorize it a bit, and them figure out where in the room to put them. Set up centers for different activities. That way when clean up time comes (and to be honest, it doesn't come every day, whoops) he knows where things go because he decided where they go. So when I say, "put all your trucks away," he can run around his room, pick them up and throw them in the big plastic laundry basket in his closet.
Sorry to get off subject and wow, this got really long really fast. :) Good luck, hope this helps.
C.