The shopping rush is over and the holiday dinners are consumed. This is a perfect time to sit back and count your blessings. And share them!
Expressing gratitude for your own blessings doesn’t mean you don’t have problems – whether financial, emotional, or family. Everyone does. But if you have the luxury of reading this newspaper column in a peaceful environment, you’re way ahead of millions of others who might be shivering from the cold, hiding to dodge bombs in a modern European country, or just plain lonely.
What can you do to share the good feelings in your life? It’s not just a financial issue, although this column revolves around personal finances. Perhaps inviting a nearby senior or child to your home for an afternoon would mean more than a check to charity. Noticing a stray dog or cat in your neighborhood and putting down food will do great things for that one living creature. And if you’re hesitant to give a few bucks to a homeless person on a street corner, how about offering a bag of fast food.
None of those examples are about money. But the difference they make is priceless. And now, on to financial donations in this season – and some tips on how to do it wisely.
Giving cash makes you feel good – whether it’s a few bucks in a bucket from the Salvation Army or contributing to a GoFundMe campaign for a family left homeless due to fire or storm become. But there is no deduction for gifts not made to a federally recognized charity and without a receipt.
You may not need the deduction. Last year (tax year 2021), you were allowed to deduct up to $300 in legitimate contributions, even if you didn’t “itemize” it on your tax return. This year, you can only deduct charitable contributions by itemizing deductions, providing receipts, and using Schedule A to report those deductions.
But with higher “standard deductions” and lower limits on income and property tax deductibility, fewer people are filing itemized returns. For 2022, the standard deduction is $12,950 on a single return and $25,900 for married filing jointly. (Those amounts rise for 2023 returns to $13,850 and $27,700.) Last year, an estimated 90% of filers used the standard deduction instead of itemizing.
Of course, tax deductions are not the only reason to give. But if you’re giving hefty amounts, you might as well get the deduction if it improves your tax picture.
Special ways to give
Perhaps you had a great income year in 2022 and want to be generous, as well as claim tax deductions. You’re not so sure of what 2023 will bring. Solve that problem by creating your own “charity foundation” and making one large donation this year to claim the tax deduction on the return you file in April. But you can defer distributions to future years, giving the money in your foundation time to grow tax-free in the stock market. These “donor-advised charitable gift funds” are available from most major mutual funds, with little paperwork to set up the account. But you must fund it before the end of the year to get a 2022 tax deduction.
Seniors subject to required minimum distributions (RMDs) from their IRA accounts can also avoid taxes on this annual distribution by stipulating that an IRA contribution (up to $100,000) be paid directly to a recognized 50l(c)3 charity. done . Again, that distribution should happen by the end of the year. But if you’ve already taken your 2022 RMD, consider that option as part of your distribution plan next year.
Research the charity
Charities make a heartfelt appeal for funds at this time of year, many of which entice you with promises of equal contributions from major donors. If you don’t know the charity, don’t fall for the field without checking their rating CharityNavigator.org. This group reviews each charity’s spending and use of funds. And if you feel generous but don’t know where your contribution will do the most good, they offer suggestions based on causes ranging from helping Ukrainian people to funding legitimate animal welfare programs.
The biblical expression in Acts says it is more blessed to give than to receive. It’s especially true this holiday season, so don’t forget to follow through on your New Year’s resolutions. And that is the savage truth.