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Donate to Charities Save Money On Taxes
Donate Money to Charities and Get a Tax Deduction
Whether it is an earthquake in Haiti, or other major event, or just a desire to help out a cause or charity, donating money is one of the best ways to help out. While other donations are always welcome, the fact is that cash donations are the most helpful because they can be directed to the area of greatest need.
Donating money to charity has another advantage. Cash donations to charities are tax deductible for most people. That means that your donation not only helps important causes do their work, it also helps your own personal finances by decreasing the amount of money owed on Federal Income Taxes. For someone in the 30% tax bracket, every dollar donated to charity would result in approximately, a 30% reduction in taxes. In other words, a thirty cent decrease in the amount of taxes owed to the government.
Another advantage of cash donations to charity is that they produce less headaches for filing taxes and are much less likely to result in an audit or other review of your tax returns. While cash donations above a certain amount require that a receipt or other documentation be kept for record purposes, there is no need to get involved in more complicated topics like valuing your charitable donation like there is when you donate a car to charity or donate used household goods like clothing to charities.
Use Tax Savings to Make A Bigger Donation
While saving money on income taxes is nice, many people are more interested in helping out important non-profit organizations and charities that do good works. Fortunately, the tax deductions that donations provide can make it so that a bigger donation is possible.
If a taxpayer is in the 30% tax bracket and wants to make a sizable charitable donation, the tax savings generated by the income tax deduction can be added to the charitable contribution. For example, a $1,000 donation would generate approximately $300 in tax savings. The donor could choose therefor to donate $1,300 instead, with same $1,000 net effect on their personal finances. In other words, a large donation can be made for the same out of pocket amount.
Always check with your tax professional prior to making any tax planning decisions.