Your charitable contributions might not lead to a tax deduction, but they will make you feel better
As someone who helps clients file taxes, I often get questions on charitable contributions. Yes, they are tax deductible when given to a 501(c)(3) organization. However, a lot of people do not itemize their deductions anymore. You would need to give enough away, combined with other common itemized deductions like mortgage interest and state and local taxes paid, to eclipse the $29,200 MFJ standard deduction. If you do not have total itemized deductions above that $29,200 figure, then you will use the standard deduction instead, thereby making your donations not really tax deductible. But, I’m here to tell you that you should still make those donations!
I am currently reading Dr. Daniel Crosby’s latest book, The Soul of Wealth. It is written in a short essay format, detailing 50 reflections on money and meaning. One of these is titled “Giving is the Path to Abundance.” Dr. Crosby presents a lot of evidence on the link between giving and happiness. While a shiny new phone may bring us temporary happiness and joy, when we give to others, “a deeper enrichment endures.” The happiness and joy from your new phones slowly erodes over time.
Dr. Crosby recommends these tips to get you started. Start small- don’t wait to give a large gift, give what you can when you can. Give of yourself- give away your time and your talents to those in need. Make it meaningful- one client recently started a scholarship at their high school alma mater. What a great idea. Diversify- give to lots of different charities that will make an impact.
While a shiny new phone may bring us temporary happiness and joy, when we give to others, “a deeper enrichment endures.”
Locally, the Buffalo Bills fan base has become known for being quite charitable. As best I can remember, that initiative started when Andy Dalton, the former Bengals QB, led his team to victory over the Ravens, and thus guaranteed the first Bills playoff appearance in 18 years. As a result, the Bills Mafia donated over several hundred thousand dollars to Andy’s foundation in a show of thanks. Del Reid, founder of the Bills Mafia, started an incredible organization called 26 Shirts https://26shirts.com/. Every two weeks they produce a very cool t-shirt with a person in need as the beneficiary. Check it out, grab some cool gear, and help someone in need. I have a ton of these shirts, and people always ask where I got them. Doing good and looking good is a win/win!
One other donation type that comes up occasionally are the Go Fund Me type campaigns. Giving to someone who is going through a tough time is not a tax-deductible donation. But, it probably does a great deal for the recipient. And it makes you feel good as well.
Always keep those receipts and when in doubt, give them to your preparer. You never know if your itemized deductions will be higher until they do all the math. Or if you are especially charitably inclined, think about grouping several years’ worth of donations into one year with the use of a donor advised fund. Never heard of a donor advised fund, reach out to me for more info. Happy end of tax year everyone, and Go Bills!
