Should I donate to charity?

Yes, without a doubt!  In fact, donate here: http://www.humanesociety.org/.  But will donating to charity lower your tax bill?  Perhaps, but not too much.

First, donating to charity will only effect your tax bill if you itemize deductions.  You only itemize deductions if your itemized deductions — generally meaning the total of state and local taxes, higher-than-typical medical expenses (the average person won’t be permitted to deduct medical expenses), mortgage interest, and charitable deductions — exceed your standard deduction (in 2011, $5,800 for individuals and $11,600 for married couples filing jointly).

Say that I’m married and I expect to pay $5,000 in state taxes and deduct $2000 in mortgage interest, will a donation of $100 to charity decrease my taxes?  Not one bit, because $7,500 (the total of my itemized deductions) is less than the standard deduction of $11,600.  Therefore, I’d choose to take the standard deduction and none of my itemized deductions matter.  However, if you live in a state with high state taxes or have a large mortgage, then you probably will itemize your deductions.

If you do itemize deductions, that $100 donated to the Humane Society won’t decrease your tax bill by $100.  At the very most, it will decrease your tax bill by $39.60 (and that’s only if you make over $380,500 a year, in which case you probably have your own tax lawyer and aren’t seeking out advice here).  If you’re married and you make between $17,000 and $69,000 a year (or are single and make between $8,500 and $35,000 a year) that $100 will probably only decrease your taxes by $15.

Would I pay $100 to decrease my tax bill by $15?  Nope.  Does this mean that you shouldn’t donate to charity?  I hope not, it just means that you shouldn’t donate to charity to save money on taxes.

And finally, if you do donate to charity (again, this is a great one: http://www.humanesociety.org/) remember to save your receipts!

 

Posted in Uncategorized | Leave a comment