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Ways You Can Give Back And Contribute To Your Tax-Saving Strategies

Ways You Can Give Back And Contribute To Your Tax-Saving Strategies

October 25, 2022
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Many people are looking for ways to save money on their taxes, and one popular method is to take advantage of tax credits and tax deductions. There are a variety of tax credits and deductions available, and each one can help you save money in different ways.

One of the benefits of certain tax deductions and credits is that they often reward you for doing things like giving back to your community. By looking out for ways that you can give back while also contributing to your tax-saving strategies, you can feel good about helping others this holiday season and know that you are also looking out for your financial success. Below we outline some of the ways giving back can benefit your taxes.

How To Save Money On Taxes With Tax Credits and Deductions

Tax credits and deductions are tax reduction strategies used by the IRS to encourage people to engage in certain activities. Tax deductions lower your taxable income, while tax credits lower your tax bill dollar for dollar. A tax credit is generally more valuable than a tax deduction. Some common examples of tax deductions are charitable donations, medical expenses, and business expenses. Some common examples of tax credits are the child tax credit, the earned income tax credit, and the solar energy tax credit. You can claim both tax credits and tax deductions on your federal income taxes.

How Much Can I Deduct?

One of the most popular tax reduction strategies is to claim a charitable donation tax credit. The rules for claiming this credit are relatively simple, but there are some limitations that you should be aware of. First, you can only deduct donations that have been made to registered charities. Secondly, the amount that you can deduct is usually limited to 60% of your net income, but depending on the type of contribution, it may be limited to 20%, 30%, or 50% instead.

woman holding donation box

How To Save Money On Taxes By Giving Back

Claiming a charitable donation tax credit can be a great way to reduce your tax bill, but it is important to understand the rules before you start writing checks. Here are some things to keep in mind.

Donate to a qualifying organization

Not every organization will qualify you for a tax deduction. When donating, make sure that you are giving to a tax-exempt organization as defined by section 501(c)(3) of the Internal Revenue Code. It is important to remember that an organization can be a nonprofit without qualifying as a tax-exempt organization, so make sure you get confirmation before you donate if you are looking to take advantage of the tax deduction.

Document Your Donation

Once you have donated to a tax-exempt organization, you must receive and save proper documentation of your donation. According to the IRS, “for contributions of cash, check, or other monetary gift (regardless of amount), you must maintain a record of the contribution: a bank record or a written communication from the qualified organization containing the name of the organization, the amount, and the date of the contribution.”

crew working at donation center

Ways To Give Back

There are many ways families can give back to their communities over the holidays and qualify for tax savings at the same time. Cash donations to qualifying charities are a great way to reduce your tax bill while helping those in need. Another tax-savvy strategy is to donate helpful items to charity. This not only declutters your home, but you can also take a tax deduction for the value of the donated items. Additionally, many communities have programs that allow you to donate holiday gifts to children in need. Not only will this brighten a child's holiday, but you'll also get a tax deduction for the value of the gifts. There are many different programs available that can help you save on your taxes. Consider giving back to both your community and your finances by supporting the following programs.

Consider These Specific Opportunities

  • Grand Canyon Conservancy - Grand Canyon Conservancy is the official nonprofit partner of Grand Canyon National Park. Donations go directly to funding projects like trail and building restoration, educational programs, and wildlife conservation.
  • The Colorado Plateau Foundation - The Colorado Plateau Foundation is a Native-led organization that supports the cultures, lands, and waters of the Colorado Plateau. Donations help support efforts like the protection of water, the protection of sacred sites, and endangered landscapes, language revitalization, and sustainable agriculture.
  • The Verde Valley Sanctuary - The Verde Valley Sanctuary is an organization that is dedicated to helping victims of family violence and sexual assault. Donations help the Verde Valley Sanctuary provide shelter, legal advocacy, and education.

Plan Your Holiday Season Giving

During the holiday season, many people look for ways to give back to their community. However, not everyone thinks about tax optimization when they donate to charities. When you give to a registered charity, you can claim a tax credit which can help to reduce the amount of tax you owe. In addition, donations can be deducted from your income, which can further reduce your tax liability. The tax benefits of donating to charity can be significant, and they can help you to save money while also supporting a good cause.

There are many things to consider when planning tax reduction strategies like charitable donations. It is important to consult a tax consultant like the professionals at Benefit & Financial Strategies, LLC. The professionals at Benefit & Financial Strategies are happy to help you with your tax-saving strategies and can answer any questions you may have. If you are interested in learning how to save money on taxes, contact us today.