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Charitable giving has many benefits, from helping you reduce taxes owed to giving you a sense of fulfillment and community building. Philanthropy is a word that originates from the Greek ancient word “philanthropia” which translates to “love of humankind” in English. So any philanthropic works you do reflect how much you care for others. There has been tremendous growth and development of modern philanthropy, which has been there since the 16th century.
In 2017, the United States hit a record high of $410 billion in charitable giving. These were findings by Charity Navigator, a search engine used for the evaluation of charities. That number is relatively more than most countries’ GDP. Since 1977, charitable giving has gone on to grow rapidly. There was a decline observed in 1987, 2008, and 2009 but it has picked up again. You can give to a charity for both qualitative and quantitative reasons, including increased happiness, family values, community support, and personal connection. The best thing about giving is you’re also awarded.
Benefits of charitable giving
Not a lot of people can guess that charitable giving is linked to economic benefits. It helps with reducing taxes, although it’s hard to associate taxes with charitable giving. Utah Car Donation is a great example since you get a tax deduction of the car’s selling price after donating a car. The IRS monitors those who donate to charitable organizations and hence provides tax benefits to them. Those who get the benefits contribute to organizations with a 501(c) tax-exempt filing status. There’s no limit to what you can give to charitable organizations, from books, securities, clothes, art, to real estate, etc. You can also deduct miles driven if you decide to volunteer your time. The IRS allows you to deduct 14 cents per mile for the time you drive while in service of charitable organizations. The following are some of the economic benefits of charitable giving.
You enjoy taxable estate reduction
When you have a significant estate, you’re obviously paying a hefty amount for your taxable estate. However, there’s a solution to this problem. You need to give part of your assets to donations. Your taxable estate will significantly go down. For instance, the highest estate tax rate is currently 40%. Any amount that exceeds the estate tax exemptions limit from your taxable estate is usually taxed at the highest estate tax rate. The federal tax exemption limits are much higher for married couples who file jointly than for the people who file alone. By 2019, it was $11.4 million for single filers and $22.8 million for married couples.
Your tax bill is significantly lowered
Charitable giving will help you reduce your taxable income significantly if you enumerate deductions on your tax return. The amount goes up to 60% of your adjusted gross income (AGI) for all the donations that go towards different public charities. For the donations usually made to cemetery organizations, private foundations, fraternal societies, plus veterans organizations, taxable income is reduced by up to 30%. If you decide to donate any more dollars above the stipulated limits, then they’ll be carried forward for a period that doesn’t exceed five years and after they expire. The type of asset you’re donating will influence your AGI limit percentage. It might be your regular income, capital gains, property, or even cash.
You can avoid capital gains taxes
If you really want to stay away from additional capital gains and taxes, then you might want to consider giving out those stocks to charity. This might happen when, for example, you get an equity compensation at a really low priced stock, and then the amount doubles. When you have qualified charities that you can donate to, you won’t pay capital gains tax on the stock. You’ll get a more significant impact when you donate your stock’s full value than if you sold the stock.
Impact on communities
Different non-profit organizations generate up to $1.1 trillion from charitable giving. This helps provide human services. Apart from that, giving back to charitable organizations has created over 13.5 million employment opportunities since at least 1 out of 10 Americans work for these organizations. When a donor gets a dollar from tax relief, then the public benefits more since it receives $3 of benefit.