Here’s How Giving Tuesday Could Help You Come Tax Time
The holidays are supposed to be a time for giving, not just getting. But if you’re hoarding your pennies like we are, then donating to charity may not be your top priority.
Still, now that we’ve had Black Friday and Cyber Monday, it’s time for Giving Tuesday. Instead of buying more stuff, this international movement is asking you to donate to causes you care about. And they’re asking you to do it right now — otherwise, you might not get around to it.
Not to be greedy, but there may be something in it for you too. You could score a charitable tax break by donating to your cause of choice, and it’s worth doing that before the end of the calendar year. It’s important to understand the rules first, though.
We also have tips for making sure your donation is going to the right place — where it will actually help real people, not just scammers or fundraisers.
Here’s everything you need to know.
What Is Giving Tuesday?
This year Giving Tuesday is on Nov. 29.
The idea behind Giving Tuesday got started in 2012. With the help of social media, it spread quickly. Over the past decade, it has grown into a global phenomenon, with Giving Tuesday movements active in 80 countries.
Last year, roughly 35 million Americans participated, donating a total of $2.7 billion. That was nearly a 10% increase compared with the previous year.
What’s This About a Tax Break?
It’s true: You might be able to claim a tax deduction if you donate to charity.
But we’re going to be honest with you here: Because of the way the U.S. tax code is written these days, this might not apply to you unless you’re relatively well off.
Tax deductions, also known as tax write-offs, lower your taxable income so you pay less in taxes. When you file your taxes for 2022, you’ll have two options:
- The standard deduction, a predetermined amount that gets subtracted from your income.
- Itemized deductions, which take into account your expenses like charitable donations and some health care costs.
The thing is, you can deduct your charitable donations only if you itemize. And most people don’t itemize these days because the standard deduction has risen to the point where it’s $12,950 for single filers or $25,900 for married couples.
Your itemized deductions have to add up to more than that or it’s not smart to itemize.
Now, if you are itemizing, financial experts will often recommend that you donate stocks or other investments instead of cash. It’s a way to avoid capital gains taxes while still getting that charitable deduction. You’d want to talk to a financial adviser about this.
Make Sure Your Donation Isn’t Wasted
Even if you’re not getting a tax break out of it, you might still consider donating to a favorite charity. But how can you make sure you’re donating to a worthy cause?
The biggest and most popular charities in the U.S. include the United Way, Feeding America, the Salvation Army and Habitat for Humanity — all of which contribute at least 80% of funds they raise to the needy, with less than 20% going to overhead. (That’s not as easy as it might sound. Even charities have to pay actual human employees and fundraisers to make the magic happen.)
Maybe you’d prefer to donate to a local charity or a more specific cause, though.
You should definitely vet that charity first. Charity Navigator is a good way to do that. It allows you to search for charities by cause, location, size and keyword — then, more importantly, it displays ratings for each charity based on its finances, transparency and accountability.
It’s an easy way to see which charities are responsibly effecting change with the money they receive. Other websites like CharityWatch and GuideStar also analyze and rate charities.
How to Help If You’re Broke
Even if you’re broke, don’t worry; you can still get behind Giving Tuesday. If you don’t have any money to spare, here are a few ways to participate without opening your wallet:
- Look for a local or virtual volunteer opportunity on VolunteerMatch.
- Give blood.
- Donate used clothing or goods to a charitable thrift store.
Not to sound sappy, but there’s a reason for the season.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.
