Tis the season of giving! December is often considered the month of giving and fuels the ideal of generosity. Now I’ve met many generous people in my lifetime. Being generous always seems to be a positive mark on a person’s character. As a CPA I also know that as long as we are generous we can give ourselves a nice bit of tax advantage. This is done by making smart decisions about how we contribute, and to whom we contribute.
Of the many generous people I’ve met throughout life, some tend to make poor decisions, in relation to tax law, regarding there giving. I’ve seen some who love a particular business (usually small local business) that they want to help, or see people in need and just throw money or clothing or food around to try and help. While very noble, there are some issues with this when considering tax laws. Anything given to an individual person can’t be deducted when itemizing!
Now I know what you’re wondering “Sean, if we can’t give to individuals and deduct, what/where can we give while still getting that tax benefit?” The answer is any qualified organization. To find out if an organization is qualified as well as to learn some of the rules surrounding the different types of organizations, you can check here:
So we know that it’s better to give to a charitable organization rather than a person. And again, that is in terms of tax law… Nothing political… But what you need to know doesn’t just end there. Another thing to consider is how much you give. I understand that there are some who would rather give away every single cent they have and leave it at that, but we’re only allowed to deduct up to half of our Adjusted Gross Income. And it doesn’t even end there! If you’re making tons of cheddar, moolah, or whatever the kids are calling it these days, there are even more rules to follow! If you make more than $250,000 and file single, or $300,000 and are married filing jointly, you may only be allowed to give away 20-30% of your AGI. Of course there is a lot more to it than just that, but it’s a little dry for a blog post.
All in all, I recommend chatting with your local CPA if you’re in a giving mood. Maybe even consider starting up a Sean Riley Relief Fund if you are so inclined!