Use Charitable Donations to Lower Your Taxes
“That’s one for you, nineteen for me”. The Beatles had it absolutely right when they sang about the taxman…
Taxes can chew up a big portion of your income, so it’s important to consider your options for reducing that bite.
Some might argue tax breaks make charitable donations less altruistic, but we’re not here to win an ethics debate, just to save you some money.
Here’s how charitable donations can lower your tax bill:
Itemized deductions
This is the meat and potatoes of any tax break.
If your itemized deductions are greater than your standard one, you can save money on your tax bill. The greater the difference, the more you save.
Contributions to an IRS-qualified public charity are one of the most common itemized deductions. Here are a few things to keep in mind about these donations:
3 tips for itemizing charitable donations
- You can only deduct donations to a 501(c) qualified organization. You can find a list of IRS approved organizations here.
- You can deduct money or property. Donating assets like stocks or real estate get you the same deduction as cash- a great option if the asset appreciated significantly since you purchase it.
- Typically, there is a deduction limit of 60% of your adjusted gross income.
And of course, one tip that applies to every tax deduction, keep a paper trail. The IRS can deny any deduction if you don’t have proof.
