6 strategies for maximizing your charitable tax deductions
“I have never worked with a client who gave because of the tax deduction,” says Dan Harris, senior vice president and national director of Philanthropic Services at U.S. Bank Wealth Management. “They give because they are passionate, or they care about certain organizations or causes.”
However, tax deductible donations can reduce your taxable income, which is one tangible benefit of charitable giving. To claim these donations, you’ll need to itemize your deductions at tax time. While the current standard deduction may cause you to think twice about donating to your favorite causes, “It’s a truism in the nonprofit world that most charitable donors don’t itemize in the first place,” Harris says.
Whatever your reasons for charitable giving, it’s a good idea to think about the most efficient ways to do so.
“The vast majority of gifts made in the U.S. are gifts of cash,” explains Harris. “But those are not the most efficient.” Here are 6 strategies to help you maximize your charitable tax deductions.
It’s important to think about what you want your donations to accomplish. To do this, it may be beneficial to define what ‘helping’ and ‘impact’ mean to you.
Harris often asks clients a few basic questions to help determine their purpose for giving:
How do you choose the organizations you give to?
How do you decide how much to donate?
Which organizations/donations are most important to you?
While it sounds simple, Harris explains that this exercise often causes people to change how they donate. Many reduce the number or organizations they give to (though not the total amount they’re giving) and find that they get more satisfaction from focused giving.
Most people give because of a desire to make a difference and to maximize their impact on the world. But even more fundamentally, “People give because philanthropy is joyous,” Harris says. “People want more joy in their lives.”
Looking to increase the impact of your giving? Here are 4 steps to finding a charity to support.