The truer measure of a man highly depends on his deeds and by what he gives to this world. It is more difficult to give money away wisely than to earn it in the first place. Wealth is not meant to feed our egos, but to feed the hungry and to help the needy ones to help themselves. Giving donations or charities is a two-way path; surprisingly it benefits both the donor and its recipient only when you learn to give smartly. Often, we can get a tax break for charitable donations in the USA. Therefore Charitable donations can do a lot good and help us save money at the same time.
We get the benefit to our taxes from charitable donations actually in the form of a credit, rather than a deduction in the USA. The difference is simply that while deductions reduce the total amount of income we can be taxed on, credits directly reduce the amount of actual tax we pay after deductions .In the case of donations, the credit, in general, is for up to 75 percent of our net income. In the final year of life, this goes up to 100 percent of our net income.
In order to be eligible for a tax credit, we have to be donating to a registered charity. The donation has to be a gift to the charity, meaning that raffles or charity dinner receipts are not generally eligible. Until 2017, there is an additional credit available to first-time donors. It’s called the First-Time Donor’s Super Credit and it adds 25 percent to the rate for up to $1000 of donated money.
Organizing and maximizing Our credits :
We must remember a few things when we are dealing with our taxes, with regard to donations. Depending on our respective incomes and deductions we can actually combine charitable donations with our spouse to maximize the total credit received. For up to five years, we can carry some donations forward to future years.
Other types of charitable giving:
We can donate in other ways besides one-time donations. There are credits available for donations of stock and other publicly traded securities. Over 90 percent of people aged over 15 make some kind of donation. This can include physical goods like clothing, food, art or toys, or even property.
Claiming your charitable donations:
To gain the benefit of tax credits, we have to keep the receipts and claim our donations on our tax forms. There are different categories, as discussed, but they’re generally calculated on Schedule 9 and Schedule 1 of our federal tax form, as well as on the provincial tax form.
The Bottom Line :
The IRS ( Internal Revenue Services) is a government agency responsible for the collection of taxes and enforcement of tax laws in the USA. The IRS requires charitable donations to meet a number of criteria in order to be tax deductible. Most importantly, our gifts must be given to a qualified organization. If gifts are made to specific individuals or political organizations it won’t count. In addition, if we received some kind of merchandise in conjunction with our donation, we can only deduct the amount above the fair market value of the item we received.
Donating to charity is a great way to show our giving spirit and save money on our taxes at the same time. Even if we don’t have a lot of money to give to charity, we can come up with our unwanted clothing and household items and still get a deduction. A witty individual never lay upon his own treasures. The more we give to others, the more we receive.