How Charitable Contributions Can Boost Your Finances
Nov 11, 2024
Donating to charity is a great way to give back to your community, but it can also benefit your wallet if you’re smart about it. With the year ending soon, it’s the perfect time to look at how charitable giving can impact your finances before December 31. Here’s how giving to causes you care about can also boost your financial health.
Save on Taxes When You Donate
One of the biggest financial perks of donating is the potential tax deduction. When you give to qualified charities, you can reduce the amount of income you’ll be taxed on. This means you could pay less in taxes overall, especially if you itemize your deductions instead of taking the standard deduction. For those who plan to donate larger amounts, itemizing can make a big difference in your tax savings.
Support Your Community and Your Brand
Giving locally benefits both your community and your business by creating goodwill and raising your visibility. When people see that you’re supporting local causes, they may feel more connected to your business. For small businesses, this can mean loyal customers who appreciate that you’re invested in the same community they are.
Donate Stocks or Securities to Save on Taxes
If you own stocks or mutual funds that have increased in value, donating them directly to a charity can be a smart move. By giving the stock instead of selling it, you avoid paying capital gains tax on the growth. This way, you can donate the entire value of the stock and save on taxes, which allows you to give more without taking a bigger financial hit.
Use Donor-Advised Funds for Flexible Giving
A donor-advised fund (DAF) works like a personal charity account. You can put money in it now, get a tax deduction this year, and decide later which charities you want to support. This lets you get the immediate financial benefit while taking your time to choose the causes you care about.
Special Giving Options for Those 70½ and Older
If you’re 70½ or older, you can give up to $100,000 directly from your IRA to a charity without having to pay income tax on it. This option is called a qualified charitable distribution (QCD) and is especially helpful if you need to take required minimum distributions (RMDs) from your retirement account. With a QCD, you can meet your RMD and avoid extra taxes.
Maximize Your Impact with Matching Gifts
If your workplace has a matching gift program, your donation can go even further. Many companies will match the amount you give, doubling your impact. If you’re a business owner, offering a matching program can help build a positive company culture and increase your business’s involvement in the community.
Make the Most of Your Giving
Charitable giving can be a win-win for you and your community. By planning your donations carefully, you can support important causes and reduce your tax bill. Remember, the deadline is December 31, so now is the time to make your contributions count for this year. Giving can be one of the most rewarding ways to make a difference – for others and for your finances.
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