Because it is the end of the year, addressing the multi-sided benefits of charitable contributions is appropriate. There are several reasons why these are so common during the holidays. Generally, people’s mindsets shift towards giving and doing right by others.
There is also a financial incentive. Because it is the end of the calendar year, charitable donations also allow people to save on taxes. Those who fall into the highest tax bracket and are taxed at the highest percentages have personal and economic reasons to donate.
CARES Act Extension
When you submit your taxes, you will need to make an itemized list of their donations. In previous years, having this itemized deduction list was paramount to getting the tax benefits of giving to charities.
However, the CARES Act allowed people who didn’t itemize their contributions to claim up to $300 (for an individual) and $600 for married couples who have chosen to file their taxes jointly. Although this was allowed in 2020, it has been extended for 2021 as well. If you made a cash donation to a public charity in the 2021 tax year, you could claim it on your taxes without having to itemize it—if it lands under the previously mentioned thresholds.
Converting IRAs
Without diving too far into the nature of Individual Retirement Accounts (IRAs), the vital aspect is how they are taxed. Contributions to traditional IRAs are tax-deductible, whereas Roth IRAs are not.
For many reasons, people may have begun an IRA and wish to convert it (Roth to Traditional or vice versa). There are tax costs associated with these conversions. If you anticipate doing this, you can do so in a year where you make a charitable contribution. The tax deduction you receive from the contribution can offset the tax costs of the conversion.
For Someone Else…
In addition to tax purposes, it is essential to highlight the significance of doing something for the benefit of someone else. If you have someone who is challenging to shop for, you can make a charitable contribution in their name to an organization or cause that resonates with that person.
Some charities send small tokens such as coins, cards, and even stuffed animals to those who donate. These can be incorporated into the gift itself.
Elder Advisors Law
At the heart of Elder Advisors Law is a genuine passion for helping other people through estate planning. Regardless of your circumstances or issues, our goal is to listen and develop an estate plan that you can rely on—one that gives you the peace of mind you deserve. That is why we practice this type of law. Contact us today to schedule a consultation, and please ask us about our complimentary workshops.
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