When tax season rolls around, many look for ways to reduce their tax burden. One strategy that can provide welcome tax relief is donating to qualified non-profit organizations. By taking advantage of the tax deductions for charitable giving, you can keep more money in your pocket while supporting causes that matter to you.
The Tax Benefits of Generosity Under U.S. tax laws, taxpayers who itemize deductions on their federal income tax returns can deduct qualifying contributions to IRS-approved 501(c)(3) non-profit organizations. This includes donations to religious institutions, educational organizations, health and human service charities, environmental groups, and many other types of non-profits.
For example, if you’re in the 24% tax bracket and donate $1,000 to charity, you can reduce your taxable income by that amount, providing tax savings up to $240. The higher your marginal tax rate, the greater the potential tax benefit from charitable giving.
Donating Non-Cash Items In addition to cash donations, you can often deduct the fair market value of non-cash contributions, such as used clothing, furniture, vehicles, and even appreciated securities like stocks and mutual funds you’ve held for over a year. Donating appreciated assets provides double tax savings by allowing you to avoid capital gains taxes you’d incur if you sold the assets yourself.
Planning Your Contributions Timing and planning are key to maximizing your tax benefits from charitable giving. Make sure to get receipts or documentation from any qualified non-profit you support. If your total non-cash contributions exceed $500, you’ll need to file IRS Form 8283 with your tax return.
While reducing your tax liability is a great incentive for charitable giving, the most rewarding benefit may be your donations’ positive impact on your community and the world. When you give to support our mission at Living It Out, you will receive donation receipts that will be useful during tax filing season. You will be helping those in need while lowering your taxes.
