End of Year Tax Breaks
Why are charities ramping up their request for charitable donations at the end of the year? A lot of people think that it’s because it’s the holiday season and people are feeling more generous. And while that may be true, the other reason that charities are reaching out is because people who think about their taxes are starting to think about potential tax breaks. And donations to charity are tax deductible, meaning that you can reduce the amount you owe to the IRS (or potentially increase your income). The charities know this, so they’re reminding you that it can be a good time to donate.
How to research a charity?
How do you know what charities are good to donate to and will be using your donation for the right purposes? I really like using Charity Navigator. They review and rate charities based on best practices. A three or four star charity is doing a good job, a one or two star charity might not be the best place to put your money. (They also have a great page on avoiding charity scams.) If they aren’t rated on Charity Navigator, you can also try to look into them in more detail online. Do some quick web searches and see what other people are saying. You can even dive into their financials if you want, though don’t let yourself be swayed by salary amounts – directors of charities certainly deserved to be paid for their work.
What charity should you choose?
Deciding where to put your charitable donations can be tough. There are so many great causes out there. I’m personally a fan of looking for great local charities, where I feel like my small donation can have a bigger impact. Of course, with a great charity, every single dollar helps, no matter how big or small the charity might be. But I like to try to find local charities doing great work in my area because that’s important to me. Maybe you prefer to give to a bigger name charity.
Charitable donations can make great gifts for people who don’t want or need any “things” in their lives. I’ve had friends ask for charitable donations for weddings and holiday gifts, because they just don’t want items. Of course, there’s nothing wrong with gifting, but it can be awesome to know that a friend made a donation in your name.
Donate Year Round
Don’t forget, charities can use your money at all times of year, not just at the end of the year (when your budgets might be tighter due to holiday gifts and travel). And of course, it all counts towards your taxes too. So if you’d like to be more charitable in the new year, consider budgeting for charitable donations!
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.