January is turning the corner, I am trying to remember my New Year’s resolutions, and my mailbox is starting to fill up with various tax forms. It is that time of year again, and hopefully I will get a refund!
Many of us sort through these documents that look like alphabet soup, either attempting to decode them ourselves or simply filling a box to drop off to a tax professional down the street. Taxes are expenses we often view as being ‘out of our control,’ but understanding the income tax formula can reveal opportunities to reduce your lifetime tax liability, pay only what you legally owe, and make well-informed decisions that align with your personal financial objectives. As we break it down, keep in mind that the tax code is an ever-changing landscape, and you should consult a tax professional to ensure that your tax planning assumptions are accurate. Let’s get to it!
Donating to charity can be a fulfilling lifelong practice, supporting causes in which we believe can make an impact on lives beyond our own. Showing generosity through giving acknowledges the belief that we have ‘enough’ and are fortunate enough to share our wealth with others. Gifts are not limited to financial capital, but may also be donated through the giving of our time, talents, and shared knowledge.
“No one has ever become poor by giving.” – Anne Frank, “The Diary of Anne Frank”
Though most of us give to charities without expecting anything in return, there are potential tax benefits for giving to qualifying Section 501(c)(3) organizations. The U.S. federal government has been expanding charitable deductions since 1917 (when top wartime tax rates were at 67%), and these gifts can be in the form of cash, securities, or other property. Notice that giving of one’s time or services is not tax-deductible, but is nonetheless valuable!
This article focuses on tax-efficient methods for donating to charity, allowing even more of your wealth to be directed toward your desired causes.