Every year, Gallup examines charitable giving and ranks more than 140 countries by several metrics.
In 2017, Gallup reported that the United States gave $410 billion to charitable causes, which ranked first. That year is the first time American charitable giving surpassed $400 billion.
Of course, a wealthy country can and should be charitable.
Gallup also monitors the percentage of citizens who made charitable donations and the number who volunteered their time. By these two measures, the U.S. falls out of the top spot but still ranks highly.
Some people like to argue the statistics or that America should be giving more than it does, but America is a giving country.
The federal government rewards charitable giving by allowing tax deductions. Most financially literate Americans know that charitable contributions are tax-deductible. However, this is only partially true.
Taxpayers must itemize their deductions on Schedule A to deduct charitable donations. Taxpayers who do not itemize their deductions receive no tax benefit for their giving.
Most people give charitably from a desire to help others and not for a tax deduction, but it is nice to have both.
If you do not itemize your deductions, there are a few strategies that you could potentially use that may enable some tax benefits. Not all of these will apply to everyone, but they might be helpful.
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Taxpayers over age 70-and-a-half with retirement accounts are forced to take an annual distribution called the required minimum distribution, also known as RMD. All RMDs from retirement accounts are taxed as regular income.
Required minimum distribution-subject taxpayers now have the choice to make charitable contributions directly from their accounts.
These charitable distributions paid to the charity direct from the IRA both lower the reportable income and satisfy the RMD requirement. Two birds with one stone.
Taxpayers can also choose to donate appreciated assets to a charity instead of cash. An example would be a stock that has grown substantially. The donation still won’t be deductible without itemization, but it will help the taxpayer avoid capital gains tax.
If you can choose between donating appreciated assets and cash, donating appreciated assets are a great way to save extra on taxes. This strategy may also cause you to lose out on future appreciation, so give some extra thought to the long-term effects.
Some business structures, like corporations, are allowed to deduct charitable contributions. You may have a company that could be used to donate to charity and reduce income. Not all companies can, so check with your CPA.
Some charitably minded taxpayers will group charitable contributions into a single year. When smaller annual deductions wouldn’t qualify, giving several years of donations together might.
Hopefully, you can benefit from one or more of these strategies. If you do not itemize your deductions and cannot benefit from donations, don’t feel too bad. You are still able to take the standard deduction, which recently doubled. The standard deduction is better than itemization for many taxpayers.