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Tax Benefits of Charitable Giving |
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(Part of a series of articles on charitable giving and the Union County Foundation by David Vollrath - Exec. Dir.) Nearly everyone who reads this article probably has engaged in some form of charitable giving during this tax year. If you haven't there still is plenty of time and opportunity. Typically the last quarter of the year is when many of us become more intentional about our giving. With the year quickly drawing to a close I thought this would be a good opportunity to review some basic information about year-end contributions. Both the state and federal government encourage charitable giving by allowing for a "charitable deduction" when we file our income taxes. Charitable deductions are applicable for those taxpayer@ that itemize their deductions. The tax code allows charitable deductions for donating cash, stock, land, or other types of property to valid charitable organizations. An organization is determined to be a legal charitable entity through a process administered by the IRS. If the deduction is of importance to you it makes sense to verify an organization's charitable status. If an organization has not been determined to be a charitable entity then a donor is not permitted to claim a charitable deduction. Charitable deductions reduce taxes at a percentage equal to your top tax rate, also known as your marginal rate. The marginal rate is the rate of tax that would apply if you added one more dollar to your taxable income. Current federal tax rates start at 10% then move to 15%, 25%, 28%, 33%, and 35%. State tax is in addition to your federal bracket. When you make a gift to a qualifying charity you are entitled to reduce your taxable income. If you are in the 25% federal tax bracket (taxable income between $58,100 and $117,250) then your income is subject to an extra $.25 in tax for every additional dollar of income. If you gift $1 to charity then your taxable income is reduced $1 and your tax decreases $.25 due to the charitable deduction. In essence your $1 donation cost you $.75 and the federal govenunent $.25. Remember that you also may realize additional savings on your state income taxes. Many taxpayers (28% & 33% brackets) find that between federal and state tax savings, their gifts to charity actually cost 1/3 less than the value of the gift. In effect the donor is giving two-thirds and the federal and state government are giving one-third. While tax savings certainly are not the sole motivation for charitable giving one can't ignore their significant impact. Understanding that the goverrunent shares in the cost of your donation can make charitable giving more attractive, more affordable, and more fulfilling. The Union County Foundation encourages you to consider your present and future charitable goals. The Foundation is equipped to help you achieve these goals by providing: planned giving and estate planning resource information, charitable gift annuities/life income plans, and a broad array of charitable choices. Please call us at 937-642-9618, email commfounduc@imetweb.net, reference our website at www.emarysville.com/unioncountyfoundation, or stop by our Marysville office at 126 N. Main St. We are committed to helping you.... “preserve your footprint in time.” |
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