There is no doubt in the fact that doing charity will always make you feel good. However, there is a fine line of difference between feeling good and receiving good on return for your charitable activities. So if we start with the present year that is 2018, we will see that although charitable activity make you feel good but in order to reach Donation tax deductions, we need to undergo with some procedural elements.
Standard deduction and charitable tax deductions always walk side by side. So, if you want your certain donation to reach tax deductions, you need to record your deductions and at the same time ensure that these deduction exceed the standard pre-set tax deduction limit.
The standard tax deduction figures
The standard tax deduction figures under the recent Tax Cuts and Jobs Act has soared considerably. For instance for legally married couple, the standard tax deduction rate is $24000 if both the spouses are filing their donation together. If the age of either spouse is 65 or more than that, then an extra $1250 gets included in to the standard tax deduction amount.
Similarly for an individual, the amount of standard tax deduction is $12,000. And those individual who are labelled as senior citizens as they come under the age bracket of 65 or more, an additional $1550 is included in the standard amount.
Keep in mind that even though the new Tax cuts and Jobs Act well-preserved the donation tax deduction, but for an ordinary benefactor, book-keeping this tax deduction would not serve any fruitful purpose to him.
However, at times, there are still some ways through which you can gain tax advantage from donations or charitable giving. So, let’s have a look at them:
You can gain maximum tax advantage from charitable giving through the Individual Retirement Account. All you need to do is ask your IRA curator to transfer the liquid cash directly from your account to an approved or qualified charity. This transfer of money from your IRA to an eligible donation is called a Qualified Charitable Distribution. Keep one thing in mind that they transfer process may not lead to an absolute tax deduction. Rather, this action will reduce your Gross Adjusted Income and reduce the amount of tax you are indebted to pay.
So, in order for the transfer to run smoothly, seek consultation from an Accountant who may act as your financial advisor. Moreover, the accountant will also help you to comprehend all the complex pointers concerning the money transfer. In this way, you will have an astute idea regarding the transfer limit and how would the transfer impact your Required Minimum Distribution.
Another way, through which you can get a tax advantage on donations is that you channelize your donations via donor advised fund. This fund can be conveniently established with any banks and will required a manageable and affordable amount that is around $5000.
As you gather your contributions to charitable donations of several years in to a single year contribution period, you tend to erase all the footraces of tax deductions. In this way, you will take the advantage of donation tax deductive collectively in the year you transfer the money in to the account that is dedicated for charity giving. Then, over the time, you can hand out the funds to charity on the basis of your preference.
How does tax deduction for donation function?
Types of organization from where you can benefit from donation tax deduction:
In this way, charity giving will make you feel good because you can benefit greatly from donation tax deduction advantage that it offers. All you need to do is read all the requirements before contributing your money to the charity.