With the year almost over, many of us are looking for ways to reduce tax liability through deductions. One of the ways you can reduce your taxable income is by donating to charity. Your end of the year charitable donation can make a difference to your tax bill, as well as make a difference in the life of someone who could use help.
However, giving to charity won’t just help your finances by reducing what you owe in taxes. Your habit of charitable giving can also provide you with other money-related advantages.
Force Yourself to Consider Your Priorities
One of the best things you can do for your finances is to understand your priorities. Whether you are a freelancer, business owner, or just working on a side gig, you can benefit by understand your values and establishing your priorities. If you really want to give to charity on a regular basis, you will make it a priority and manage your finances accordingly.
The habit of charitable giving forces you to think about how you want to direct your financial resources, and allows you to lay the groundwork for a more fulfilling money philosophy.
Encourage Better Budgeting
When you know your priorities, you are far more likely to create a budget that allows you to fund those priorities. If charitable giving is one of your major priorities, you will find a way to include it in your budget. It will also encourage you to think about where your other spending fits on your list, and help you rank which items you should focus on the most.
If you want to make sure that you have enough money to give to charity, a better budget can help. And, of course, anytime you have a good budget, you are far more likely to show improvement in other areas of your financial life.
Giving to charity forces you to step back and figure out what really matters in your life, and evaluate what you want to do with your money. Then, you can create a better budget that can help you manage your finances more effectively.
Donate Goods to Charity
While it’s fairly obvious that you can donate cash and claim a deduction, you might not realize that you can also donate goods to charity and deduct the current market value on your taxes. This can be a useful way to reap a financial benefit from things you no longer use, but that you might not want to go to the trouble of selling.
Getting things ready to sell, whether you use the Internet or hold a yard sale, takes a lot of time and energy, and often you can’t sell an item for much anyway. A t-shirt in good condition that you might sell for 50 cents at a yard sale might be considered worth three dollars if you donate it and take the tax deduction. Just make sure you get a proper receipt for your donation so that you have records for the IRS.
There are many charities that could benefit from your generosity. Not only can you feel good about your decision to donate, but you can also see tax benefits and even see indirect benefits as you learn to better manage your money.
