Charitable Contributions – The Win-Win-Win Situation
Many philanthropists give simply to improve the welfare of others. I’m inspired each day by co-workers, friends and family who are dedicated to supporting numerous charities. Generosity is a great feeling.
But as a tax professional, I have to remind you about the added benefit of a tax deduction for donations of money or property. If you itemize, you can save up to 40 cents for each dollar of donations combined from your federal and state returns, depending on your tax bracket. Remember to save your receipts and canceled checks.
Need even more incentive for your altruism? State tax credits are sometimes a lesser known source of tax benefits for charitable contributions. Missouri and several other states grant tax credits to certain charities who apply with specific programs each year. These credits are equal to 50% or 70% of the total contribution. Credits are even better than deductions because they reduce the tax you owed dollar for dollar. Giving $1,000 to charity eligible for 50% credits can give you a $500 credit that counts as a payment towards your tax liability, just like withholding or estimated payments. As a bonus, you’ll still get the normal deduction, as well, if you itemize.
If you want to take advantage of the credit, it’s best to check with the charity first to make sure credits are still available. They can also provide you with the form to claim your credit with Missouri. Giving can be so rewarding!