Charitable Giving and Taxes: Following Your Heart and the IRS Rules

Charitable Giving and Taxes: Following Your Heart and the IRS Rules

March 23, 2022

A saying goes, "It is more blessed to give than to receive," and at Triada Advisors, we agree with that statement. Not only do charitable donations benefit the less fortunate, but they can also enrich your life and provide you with a sense of purpose. 

People contribute to charities for a whole host of reasons. Charities Aid Foundation asked more than 700 donors why they donate to find out some of the key motivations behind charitable giving. 96% of them said they gave to charity because they felt a sense of duty to use their own good fortune to give back to society, tackle inequality, and help others. Additionally, 75% said that the key influence behind their charitable giving was a specific cause they felt passionate about, 71% responded that their spiritual and religious beliefs were the primary motivating factor behind their charitable donations, and 61% mentioned personal life-changing experiences that led them to give. 

Regardless of why you decide to give, the important thing is that you do it. Here are a few reasons we believe giving is important. 

It Feels Good (On Both Sides)

Even if you’ve never donated to charity before, think about a time when you did something kind and selfless for someone else. Maybe you bought a friend a meal. Perhaps you helped a neighbor unload their groceries. Or it’s possible that you gave a few dollars to someone on the street who was in need. Whatever it was, think about how it made you feel. 

Giving selflessly has been known to be a mood-booster. Knowing that you have contributed to someone else’s wellbeing could make you feel happy and fulfilled. On the flip side, your contribution will also make the recipient(s) feel good. 

It Strengthens Your Personal Values

As an individual, you have your own set of values: Things you passionately believe in and live by. By giving to charity, you reinforce these values because you start living them. For example, maybe you value education and believe that all children deserve access to a classroom. By contributing a charitable donation to an organization that sends teachers into developing nations, you are living that value. 

It Inspires Others

Even if you are not aware of it, there are people out there that look up to you. Whether it’s your children, nephews, nieces, or even friends or colleagues, your actions have the potential to create a domino effect. By donating to causes you care about, you plant seeds in the minds and hearts of those you surround yourself with. Maybe, just maybe, your influence will inspire them to give back as well.

Donations Afford You Tax Deductions

Charitable donations to specific organizations can result in income tax deductions, which lower your taxable income. Deductions for charitable donations can be up to 60% of your adjusted gross income. The good news is that no matter how much money you earn, you can still claim tax deductions as long as you give to recognized charitable organizations. Note that in order to claim tax deductions, you should be sure to save receipts for your donations. 

It is worth noting that you can also give to charity by donating household items (such items attract a tax deduction relative to their value at the time of donation), as well as by volunteering your time. For example, you can claim unreimbursed car expenses as a charitable gift if you drove for a charitable organization. Just be sure to share necessary information, including written confirmation from the charity you volunteered with, with the IRS as required at the end of the year. 

The Bottom Line

Donating to charity is a true win-win. It makes you feel good. It’s fulfilling. It positively impacts your community. It inspires others to be more generous. No matter how or why you give back, your efforts do not go unnoticed. Are you interested in discussing your charitable giving strategy? Our door is always open. Schedule a meeting with your Triada team today.