Reap The Tax Benefits of Donating
Donating to qualified charities like Central Asia Institute is a powerful means to give back and help others in need. It can be a special gesture to honor someone’s memory or a chance to make a stand for something important in your life. Along with helping others, giving to charity can provide a financial benefit. Many donations can be deducted from taxable income meaning you might pay lower taxes.
It’s important to know what kind of tax deductions you are eligible for, and what kind of donations qualify for these deductions. Here are a few tips to help you get started.
Which Organizations Qualify for Tax-Exempt Gifts
Not all organizations that receive donations and gifts qualify for a charitable donation deduction. Political organizations and candidates, private individuals, foreign governments and foreign charities, as well as certain private foundations do not qualify for the deduction. Be sure you know in advance if your contribution will be eligible. You can check the organization’s website for financials, ask them directly or check online sites such as Guidestar and Charity Navigator. CAI reports all our financial and auditing information on our website so potential donors see where their money goes.
Cash, Stocks, and Benefits: What Can You Give?
Cash Donations: A cash donation is deductible in the year that the money is given, even if the check is cashed the next year. As stated earlier, be sure to keep a record of the transaction with the organization name, date of the contribution, and the amount.
Stocks, Bonds and Securities: Giving stock market shares and other intangible assets is another way to give a tax-deductible donation. The amount of the donation is determined by the fair market value the day the stocks are donated. The donor can deduct the amount.
Benefits: Concerts, galas, silent auctions, and other benefit events are fun and festive ways to show your support for an organization. However, you can only claim any donation you made over the value of the benefit you received. For example, if you were to purchase concert tickets at a silent auction, you couldn’t claim the full amount you paid on your taxes. You could only claim any money you spent over the face value of the tickets.
Know Your Tax Bracket
Charitable giving in any amount has an impact on the organization you choose to benefit, but the tax benefits to donating are more substantial as you climb into higher tax brackets. If you’re not sure where you fall, check out this tax bracket calculator from taxact.com. For example, if you give $100 and you’re in the 25% tax bracket, you’ll be able to deduct $25 from your income. If you’re in the 35% tax bracket you can deduct $35. A tax accountant can advise you on the how to get the most out of your charitable giving.
Itemize Taxes to Make Charitable Deductions Count
The key to claiming deductions from your charitable donation is to itemize your expenses on the Schedule A tax form. It’s important to compare your itemized return with the standard deductions to be sure it reduces your taxes more than taking a standard deduction. A professional tax accountant can help guide you as can some online tax programs. Be sure to save receipts, canceled checks or official documents for your records incase the amount you gave comes into question later.
Other Benefits of Charitable Giving
Along with tax benefits, people who give to charities glean a number of other positive effects. Donating time or money can increase feelings of life satisfaction, relieve stress and even help improve key measurements of your health. Some studies suggest that donating to charity activates the brain’s reward center and elicits release of dopamine, the feel good chemical. People who volunteer or give to charity report reduced rates of stress and lower blood pressure.
It’s no question that donating to a charity or nonprofit organization benefits more than just the communities they serve. By donating to qualified nonprofit organizations like CAI, your generosity will help girls earn an education, increase your satisfaction, and might even help your bank account.
For more information check out these web pages
Charity Navigator: Tax Benefits of Giving
IRS: Eight Tips for Deducting Charitable Contributions
Forbes: Benefits from Giving