TAX SEASON 2024
What types of payments make you pay less tax in the USA? NGOs, donations, charity...
The US tax code offers opportunities to lessen your tax burden through charitable giving though only a specific list of organisations qualify.
Tax season can be a daunting time, but for many Americans it also presents an opportunity to lower their tax contribution. Donating to qualified organisations can significantly reduce your taxable income, leading to a smaller tax bill.
The key to tax-deductible giving lies in understanding which organisations qualify. The IRS (Internal Revenue Service) maintains a directory of approved charities. Donations made to these organisations can be subtracted from your adjusted gross income (AGI), effectively lowering the amount of income taxed by the government.
If a non-governmental organisation is on that list, then donations are tax-deductible. If not, then they are not deductible.
Maximising your deduction
Understanding the types of donations that qualify is crucial. Here are some common examples:
- Cash donations: The simplest and most straightforward option. Donations made by check or credit card are generally deductible.
- Non-cash donations: Donating goods in good condition, like clothing or furniture, can be deducted at their fair market value. However, proper documentation is essential.
- Mileage: If you use your car for volunteering purposes, you can deduct the standard mileage rate set by the IRS.
Important considerations
While donating offers tax benefits, there are limitations to keep in mind that the amount you can deduct is capped as a percentage of your AGI. Consult a tax advisor for specific limits based on your filing status and income level. Always keep receipts for all donations, especially non-cash ones, for tax filing purposes, as there is unlikely to be evidence of your giving otherwise.