Donating to charity is something that many Americans do and is one of the hallmarks of our country. These donations allow charitable groups to help improve the lives of others through a myriad of ways. Non-profit organizations very often rely on community and individual donations to support their operations, including a donation of a person’s time through volunteering. Knowing how to properly budget to support a charitable cause can help everyone contribute to the greater good of their community and the nation. Additionally, being informed about the financial benefits of charitable giving can add extra incentive to hesitant donors, especially those who have financial concerns.
How to Budget for Charity
Year-round donations are needed for many organizations to operate, so getting into the habit of budgeting for charitable donations can help support local groups and give you a feeling of purpose. Committing to select organizations or causes at the start of the year can give you a sense of direction and well-being. By planning ahead this can help eliminate some of the deliberation that often hinders spur-of-the-moment donations to those in need.
Incorporating charitable donations into your monthly budget can hold you accountable, and you may even consider automating the donations when possible. Another thing to consider is employer matching programs, where an individual donation can be matched up to a certain amount by your employer, which will increase the impact of your donations and help you make a bigger difference. You may also look into contributing to a donor-advised fund, which let you make a charitable contribution, receive a tax deduction if you are eligible and allows you to invest those funds so that you can grow the contribution over time. You can then grant to your chosen charitable organization(s) from the donor-advised fund. Your financial advisor can be a great source of information on donor-advised funds.
There are several things to consider when trying to make a habit of giving to charity, and these tips can make the process simpler and more effective.
Financial Benefits
Beyond the social impact and good will, charitable donations also stand to benefit the individuals making the contributions, as well. The most notable financial benefits that come from charitable giving entail tax deductions. For the most part, donors are able to claim their donations when filing their taxes and receive deductions based on the amount they gave; there are limits to what can be deducted, usually between 20% and 50% of your income, but for most donors, these limits are high. This year, the limits were raised in an effort to encourage more contributions to aid in COVID-19 relief initiatives, so donors are able to claim more donations on their taxes from this year than usual. When looking to claim donations, it is important to keep accurate documentation of your contributions to ensure you are able to verify your donations if needed.
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