Americans, you’re a giving bunch! New numbers just out from the Giving USA Annual Report show the country donated $390 billion to charity in 2016. That’s up almost three percent from 2015.
And while you know charitable giving is noble, did you know it can benefit your tax bill as well? By donating to a non-profit organization, you are not only helping them spread their mission but also helping your pocketbook. If you itemize your taxes, donations can make a big difference. The total amount you donated is deducted from your adjusted gross income (AGI). This means that it could save hundreds or even thousands of dollars off your tax bill.
Here are a few Simply Money Advisors tips to getting the highest tax deduction for your charitable giving.
Keep track of donations
Any donation under $250 needs a tax bill receipt. This would include the date of the exchange and the fair market value of what was donated. Anything over $250 needs a written acknowledgment from the charity, the fair market value, and clarification that you received nothing in exchange for this donation.
If you purchase a ticket for a fundraiser, you can only claim the amount over what you are getting in return. For example, if you purchase a dinner ticket you can only claim the amount over the dinner value.
Keeping track of your deductions can be a challenge. Using an app can help you stay organized for when tax season comes around. iDonatedit, Donation Assistant, and ItsDeductable are a few tools that help you can stay on top of your non-cash and cash deductions.
Ever consider giving stock or another asset to charity instead of cash? If you haven’t considered this as an option, you may want to think again. If you give stock that you have held for more than a year and has increased in value you can use the fair market value on the day you give the stock. You won’t be taxed on capital gains. However, if the stock lost value it is better to sell and give the cash. You will also be able to claim a capital gains loss when you sell it.
Donate before December 31st
Lastly, you want to make sure that you are only deducting donations made within the year. You can make them up to December 31st. Consider setting your donations up for auto distribution. It will make it easier to keep track of your donations and include your donations in the monthly budget.
The Simply Money Point
You may want to consider adding charitable giving to your financial plan and future. Simply Money Advisors recommends that you sit down with a financial planner as well as a tax professional to determine the best way to contribute to your favorite cause.
Wondering how charitable giving fits into your retirement plan? Get started by talking with our Simply Money Advisors team.