Best Ways to Use Charity to Lower Your Taxes
Everyone wants to pay lower taxes, and giving to charity is an easy way to make it happen. Not only do you feel good about giving, you feel good again come tax time.
It's no secret that charitable giving is a way to get tax deductions, but most people don't capitalize on it. To make itemized deductions through charity worth it, they need to add up to more than your standard deduction.
The key isn't necessarily giving more. Instead, focus on how you give to maximize your tax deduction.
The first rule of interactions with the IRS is that everything must be documented. When it comes to charitable deductions, that means you have to have proof of your donation.
That proof can be a receipt or a check stub. But if you want to take a deduction, you need something physical that says you donated the amount you claimed. To achieve that, make sure you leave a paper trail.
Many charitable organizations will provide you with a receipt at the end of the business year or after your donation as proof of the amount donated. That can be in the form of an email or a written statement.
It can also be achieved by donating via check, instead of cash, since check stubs provide proof of payment. Just make sure the memo line specifies the purpose.
If you're in a financial position to do so, consider making several years' worth of donations at once to take advantage of the tax breaks. For example, giving $5,000 in one year will get you more of a tax deduction than donating $1,000 over five years, since each year's donation may not be worth more than the standard tax deduction.
That kind of lump-sum giving is a challenge for many, but donating used items is something most people can do and you can still get a tax deduction for it.
When you donate used books, clothes, or electronics, get a receipt from the organization that gives an approximate value for the goods. If possible, it's even better to get a photograph of what you donated and keep it with the receipt.
Anything you claim on your taxes needs to be backed up with documentation. But once you have the paperwork in order, those charitable gifts can come back to reward you.