More donations means less taxes paid in April
Giving is not only emotionally good for you — it’s also good for your bank account.
Donating is financially wise because you can claim it as a deduction at the end of the year. Money donated to charities reduces your taxable income.
“You get a greater tax benefit if you’re in a higher tax bracket,” explained Gil Charney, principal tax analyst at H&R block. “For example, if you are in the 36 percent tax bracket — the highest — you save $36 for every $100 you contribute. The higher tax bracket you are in, the better you are in tax savings.”
End-of-the-year giving is also popular because “giving away money will lower your tax bracket,” said Charney. “It does not matter when you give — you can give any time before the end of Dec. 31, 2010, and still take a deduction.”
Just make sure you donate to a 501(c)(3) qualified organization, cautioned Charney — such as schools, Boy Scouts, religious groups or the Salvation Army.
Why does the federal government reward us for making donations?
“It’s part of using the tax code to carry out social policy — you can get tax benefits for retirement, getting married, having kids, owning a home,” said Charney. “This is just another example where the government is trying to promote positive behavior.”
Plus, he added, private giving enables you to decide who your money should help — not Uncle Sam.