Charitable Contributions: How to Give
At the end of the year, many people start thinking about making charitable contributions. People want to help others who are less fortunate and charitable giving is a great way to do just. But what feels like a no-brainer decision can sometimes get bogged down with things like figuring out who should receive your hard-earned dollars or worrying about tax implications.
So here are some tips to help you get started making charitable contributions.
How to Know How Much to Give
This is a question that you and you alone can answer. Giving to charity is a wonderful thing, but not at the expense of your own financial well-being or that of your family. It's a great idea to include this in your household budget so you can only give an amount that's comfortable for you.
How to Pick a Charity
When picking a charity, it's best to research different organizations. Nowadays, it's relatively easy to be scammed, especially online, and you obviously don't want to have your good intentions end up in some con man's pocket.
There a three main things you should consider when choosing a charity:
- What's their mission and who do they serve?
- Is this mission in line with your own values and beliefs?
- Is the organization a nonprofit registered as a 501(c)(3) with the IRS?
How to Claim a Tax Deduction
Your charitable contributions could be deductible for income tax purposes. To claim the deduction, the organization you give to must be a qualified charitable organization. If you aren't sure if they are, ask to see their designation from the IRS. Some organizations even post these letters online. Charity Navigator offers a calculator to help you estimate the net cost of a donation based on your tax bracket.
The following are other tax considerations of note that you should think about before you make a donation:
- Always get a receipt for your donation.
- To claim a charitable deduction, you must itemize your deductions on your tax return.
- Check to see if your employer offers to match donations.
- Donations made to individuals – no matter how needy – don't qualify for a deduction.
- There are limits to the amounts that can be deducted in a year.
It's also worth mentioning that donating appreciated assets, like stocks or mutual funds, can provide a double benefit. Not only do you get a deduction for the market value of the investment, you won't have to pay taxes on the capital gains. If you can't itemize your deductions or aren't sure if a specific type of donation qualifies, it's always best to consult with a financial or tax advisor.
Charitable contributions are a way to give to others and make a family commitment to community service, but don't let the details scare you away from making a difference in someone else's life. With a little bit of know-how and some research, you can make charitable giving a regular part of your family's holiday traditions.
4. Consider a Roth IRA
Another way to save for college is through a Roth individual retirement account (IRA). The money you deposit into a Roth has already been taxed, but after that it grows tax-free. The funds are not taxed when you make withdrawals for college expenses such as tuition, housing and books. If your child decides not to attend college, you can still use the savings for your retirement. Using a Roth IRA to fund college isn't for everyone, as the plans have strict contribution limits. Forbes reports it could affect a student's ability to get financial aid.
5. Automate Your Savings
No matter how you choose to save for college, you should set up automated bank transfers to ensure that your good intentions become a reality. Automated transfers help you live within your means at a time when family demands make it easy to get sidetracked.
Figuring out the best ways you can save for college can sometimes feel like a story with no end. But if you plan ahead and contribute little by little to different investment options, you can get it done.
It's important to your child's future, so why not start today?