How Making a Charitable Donation Can Help You Save

Donating money or items to charity might be more beneficial than you realize.

When times are tough, it can be a challenge to reach out a hand—but helping others doesn’t have to be self-sacrificing.

No matter the amount, your donation to charity can help. Donations to America’s biggest charities declined by 11 percent in 2009, the biggest drop in 20 years.

You’ll get the biggest takeaway if you itemize your deductions on your income tax return. This means your total deductions, which include charitable donations and other items such as educational or medical expenses, exceed the standard deduction.

“Some people think, ‘Oh, if I make this $500 donation I’ll save on my taxes,’ but that isn’t really true unless you exceed the standard deduction,” says Camille Gaines, founder and owner of financialwoman.com. “Be as conscious about your giving as you are about spending and saving.”

The standard deduction changes from year to year. For 2010 it’s between $5,700 and $11,400 depending on your filing status. If a generous donation to charity takes you over your standard deduction threshold, you can itemize and benefit from a bigger tax deduction.

Keep Deductions Organized
Gaines recommends reviewing your previous tax deductions with a CPA to see how they stacked up, especially when it comes to charitable giving. Add up your deductions to see if you can itemize this year. You can only deduct donations made during the tax year, so now is a great time to start planning for 2011.

When you do make donations, be organized. Use one credit card or checking account to make all your donations and keep receipts to track every dollar you give, Gaines suggests. Plus, the IRS requires a receipt for all donations over $250.

“Good record-keeping is important,” Gaines says. “Even small donations can add up.”

For informational purposes only. Please consult a tax professional for specific tax advice related to your individual situation.