The Correlation Between End of Year Giving and TaxesDecember 29, 2021
It’s no secret that most people wait until the new year to start their resolutions. But many people only stick to their resolutions for a few weeks before returning to their old habits. That’s why we want to share a little secret for lasting change with you: in moments of decision, ACT.
We mean that rather than waiting until 2022 to become a better, more giving version of yourself, you can start now. The relationship between end of year giving and taxes is straightforward. By donating to charitable organizations before the year is over, you get a present for starting your resolution early: a deduction on your taxes.
Take Advantage of Tax Savings with an End of Year Donation
When you make a charitable contribution this holiday season, you’re choosing to maximize potential tax savings while also helping those in need.
This year Congress has extended some of the favorable tax changes made by the CARES Act in March of 2020. For example:
- If you itemize deductions in 2021, the cap on annual giving for gifts of cash is 100% of adjusted gross income (AGI) instead of the usual 60% of AGI limit. That means a donor who uses all of his or her available deductions for qualified gifts would pay no federal income tax in 2021. Pro Tip: 2021 is a great year to think about converting a traditional IRA to a Roth IRA. If you give a gift of cash to a public charity at the same time, you offset the income tax liability of the Roth conversion using this maximum deduction for cash gifts.
- Donors who claim the standard deduction still have an above-the-line deduction for charitable gifts. The amount remains the same for an individual ($300), but married couples filing joint returns can deduct up to $600, an increase from last year.
Please note, in both of these cases, the gift must be cash and made to a public charity (excluding donor-advised funds).
How do I decide between a standard deduction and an itemized deduction?
Generally speaking, a standard deduction is a flat amount determined by the IRS based on your filing status. An itemized deduction is what you actually spent on certain deductible expenses, such as medical expenses, state and local taxes, mortgage interest, and charitable contributions deductions.
Claiming a standard deduction is often seen as the easier option (90% of Americans choose this option) because you don’t have to keep track of money spent and receipts of proof. However, you could lower your tax bill if your itemized deductions are greater in monetary value than the standard deduction.
For 2021 tax returns, the standard deduction numbers are as follows:
- $12,550 for single taxpayers and married individuals filing separate returns.
- $18,800 for heads of household.
- $25,100 for married couples filing jointly or qualifying widow(er).
Another option you can take advantage of is gift bundling. Gift bundling is a great way to optimize your end of year giving and taxes strategy. If you donate more than $600 in 2021, you can choose to bundle your donations. For example, if you typically donate $5,000 a year to a charitable organization, consider donating $10,000 in one year and skipping the following year. That way, when you combine it with your other potential itemized deductions, you can receive a higher tax deduction.
Donate to Vehicles For Change
If you’re looking for a charitable organization to donate to this year, consider donating to Vehicles for Change. Since we started in 1999, we’ve been able to award 7,500 cars to low-income families and improve the lives of over 25,000 people living in the Baltimore/D.C. communities.
You can donate in the following ways:
Amazon Smile: Use AmazonSmile and select Vehicles for Change as your charity of choice. Select the organization that says “Location: Halethorpe, MD I Year Founded: 1999.”
Donate Your Car: Becoming part of the Vehicles for Change donor family is easy. It starts with a simple donation form. You’re able to complete this one of the three ways: Online, printed and mailed, faxed or emailed or by calling us at 855-820-7990 and complete the form over the phone.
Tell A Friend: Don’t forget—you can always encourage friends and family looking to sell their cars to donate their vehicle instead.
Contact Us Today
End 2021 on a positive note by giving back to your community. We’d be honored to be a small part of your charitable donation this year. When you take the initiative to donate your used car to Vehicles for Change, we handle the nitty-gritty details. It’s as simple as these three steps:
- Complete the donation form
- Schedule a pick-up…
- Hand over the keys, and know you’re changing someone’s life by doing so!