‘Tis the season for end-of-year giving! Holidays can often tug at the heart-strings and bring about charitable giving. Defined, Philanthropy is the desire to promote others’ welfare, expressed primarily by the generous donations of money to good causes. There’s a difference between philanthropy and charitable giving. Charity aims to relieve the pain of social problems, whereas philanthropy seeks to address the root of the problem.
Either way you choose to give back, you can help change the lives of many people in need. This is especially important during these uncertain times of a pandemic. If you are blessed this year or still have your business, sharing what you have with others will be a fantastic way to give back to your community. Not only will you be helping others, but you can reap the benefits of giving as well.
Financial Rewards Of Giving
While your primary reason for giving is probably not a financial reason, it’s still a nice gesture to be rewarded for your efforts. The IRS actually gives back to those who donate to charitable organizations by reducing your tax burden, specifically to organizations with a 501(c) tax-exempt filing status. You can donate cash, securities, real estate, clothing, books, art and much more. A deduction of miles driven in service of charitable organizations if you donate your time (14 cents per mile) is even allowed by the IRS. These are just a few of the financial benefits of giving:
Lower your tax bill.
This Nerdwallet article explains the rules of how much you can deduct and how to claim tax-deductible donations on your tax return. If you itemize deductions on your tax return, charitable contributions can help lower your taxable income up to 60% of your adjusted gross income (AGI) for donations to public charities. You can also reduce your taxable income by up to 30% by donating to certain private foundations. Some include veteran organizations, cemetery organizations, and fraternal societies.
Reduce your taxable estate.
When your estate is subject to estate tax, you can gift assets to help reduce your taxable estate size. If your taxable estate is above the estate tax exemption limits, then the amount above the limit will be taxed at the highest estate tax rate.
Help avoid capital gains taxes.
If you received equity compensation at a low stock price and the price has doubled since then, consider gifting stocks to avoid additional taxes and capital gains. Mercer Advisors explains the financial giving opportunity from regular charitable contributions and managing capital gains from concentrated stock positions.
In summary, philanthropy and charitable giving can provide a sense of fulfillment, give back to your community, and minimize taxes. The benefit of saving taxes can provide even more investment into your business and community, however you choose to give. Some companies who have large tax breaks decide to give back to their employees through bonuses, or even trips. Many companies return the savings to their customers. They can use their tax breaks to invest more and expand more, creating more jobs for people.
Businesses may choose to invest back into their personal development or for their families for individuals who are not part of a big business. Many people are investing in real estate. The possibilities are endless! This is how the economy flows through charitable giving and sharing financial rewards.
2021 is predicted to be the perfect year to invest in real estate with interest rates remaining low. You can write off your charitable giving to save on taxes and invest in your future. What are some ways you give back to your community?
Contributing author: Melissa Momcilovich