Right around this time of year the phones start ringing, real paper letters start showing up in your mail box and their virtual counterpart, emails, begin to fill your virtual inbox.
No, I’m not talking about the sales circulars… I’m talking about organizations fishing for charitable contributions!
End of Year Push for Charitable Contributions
I’m sure you have noticed the yearly push for charitable contributions has begun. I’ve already received mail from my local volunteer fire department and have received a couple calls from various charitable organizations. Giving to charities is a noble cause but you should never feel pressured to give.
I set an annual giving budget and when it is gone I quit giving for the year. I only support the charities that I chose and I won’t donate to every single one that calls. I feel that my giving budget should support the causes I care for in the most efficient way possible so I rarely give at the end of the year.
There are a few things the charities may say to try to convince you to give now. Charities are very good at fundraising and you should be prepared and know some of their tactics ahead of time. Don’t get me wrong, I totally support charitable giving. I just don’t support the end of year fundraising blitz.
Your Gift is Tax Deductible… Maybe
Charities make a huge push that your contribution is tax deductible and that by giving to charity you will save money on your taxes next year. Not so fast. The people calling on behalf of the charities probably aren’t tax professionals. You will only get a tax deduction if you can itemize your deductions. What does that mean?
In order for the deduction to actually save you money on taxes you must have more itemized deductions on your tax return than your standard deduction which isn’t always the case. If you’re not sure, take a look at last year’s tax return and see if you used the standard deduction or if you itemized deductions.
Another item to note is that for every dollar you give to charity you won’t receive a dollar off of your tax return. There are certain tax preferences that have this treatment but they are called tax credits and charitable giving is a deduction, not a credit.
A deduction will reduce your taxable income, not your tax due, by one dollar for every dollar of deductions. This means instead of saving a dollar you’ll only save your marginal tax rate (the rate you pay on your next dollar of income) for each dollar you give.
Urgency – The End of the Year is Coming!
Finally, charities will make it seem urgent that you give before the end of the year. As long as Congress doesn’t eliminate the charitable contributions deduction (which I think is very unlikely) you can still take this deduction next year. The charity will still be accepting donations! On top of that, if you’re marginal tax rate increases next year your charitable contributions will be worth even more next year!
Do you give to charities at the end of the year fundraising blitz?