We all know the saying, “It’s better to give than receive.” Giving makes us feel good, right? And we usually don’t think about what’s in it for us.
But, what about charitable giving? Depending on the amount of your charitable contributions, you could be in for a sizeable tax benefit. As a matter of fact, if you factor your charitable donations into your budget, it will allow you to be more generous and lead to strategies that could improve your financial planning long term.
With tax season just around the corner, let’s take a look at some benefits of charitable giving and what can be deducted.
That altruistic feeling
Whether we donate to them or not, we all have causes near and dear to our heart. If you’re an animal lover, the ASPCA commercials probably tug at your heartstrings. If helping kids is where your passion lies, then charities like St. Jude’s and the Shriner’s Hospital probably resonate with you. Regardless of where your loyalties lie, we all love the feeling of helping other people. Scientific studies have even shown that charitable giving activates pleasure centers in the brain.
Charitable donation deductions actually allow you to lower the amount of taxable income. Of course, you can’t donate to just any organization. In order for donations or gifts to qualify, they have to be recognized tax-exempt organizations. Typically, religious organizations, veterans’ organizations and community organizations qualify as tax exempt.
Have you made any donations to state, federal, or local governments for public purposes, like donating to rehab a public park? You can deduct those donations. You can also deduct any expenses you incur as a volunteer for a qualified organization or if you donate a qualified vehicle.
What does this mean for you?
Let’s be honest. Taxes, deductions, and tax law can be overwhelming and difficult to understand if you don’t speak that language. It’s always a good idea to sit down with a qualified financial planner to come up with a plan for donating to charities. Your financial planner can help you figure out what types of donations work for you and your future plans. They can also help you find organizations that share the same goals and ideals as you. Also, if you want to make charitable giving a recurring activity this year, look at setting aside money in a Power Financial Federal Credit Union Savings Account. That way, you can save smaller amounts at a time to make it easier to give back vs one lump sum all at once.
While you shouldn’t donate funds just for your benefit, if you happen to be donating anyway, there’s no harm in deducting the amount on your taxes. No matter which way you decide to give or which charity you choose, giving back to organizations that do good feels good.