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By Maggie Tomasek
While the holiday season is the most popular time for making charitable donations, really any time of year can be a good time for giving. Supporting charities and causes you believe in can make you feel good about spending money, and you can also reap other rewards in the form of tax deductions for donations. Here’s some advice to help you make the most of your charitable donations, no matter how large or small your gifts.
The same way you budget for things like travel, home improvements or car repairs, you can include charitable giving in your annual budget. Open a high-rate savings account dedicated specifically to your donation fund and set up automatic transfers to put away a little money each month.
Before you part with your money, confirm that the organization is a registered 501(c)3; you can use the tax-exempt organization search tool on the IRS website. Next, look up the charity on a rating site like Guidestar.org or CharityNavigator.org, both of which provide detailed financial information about how the nonprofit is spending its money. For example, you can find how much of the charity’s budget goes toward programs vs. how much goes to the CEO. Based on this information, you can assess whether and how much of a charitable donation you want to give. Also, it’s best to donate directly to the charity rather than through a phone solicitor because telephone charity scams are popular – and sadly effective – among fraudsters.
There are so many great organizations and causes out there, it can be hard to pick only one to support. However, because of various handling and processing costs often associated with receiving donations, your money can usually go further by limiting your charitable donations to just one or two charities. Rather than giving $50 to 10 charities, you could make a bigger impact by giving $500 to one charity.
Does your employer have a charitable donation matching benefit? For example, Alliant offers employees up to $200 per year in charitable donation matching to 501(c)3 organizations. So if I donate $200 to my favorite charity, the Alliant Credit Union Foundation will match my donation, and now I’ve doubled my impact. Also, watch out for organizations offering to match donations to charities during limited promotional periods. Local NPR stations often do these types of matching promotions during pledge drives.
Because of recent tax law changes with higher standard deductions, many taxpayers won’t be able to claim a tax deduction for donations. To make the most of your contribution while still getting the tax deduction benefit, you can save up your charitable donation budget for two years rather than giving money every year. So, if your annual giving budget is $1,000, you could give $3,000 every three years instead. That way, this larger amount could allow you to take the itemized deduction to get the tax benefit for simply supporting your favorite charities that year.
One option for retirees age 70½ or older to consider is transferring money from an IRA to a charity instead of taking the required minimum distribution. This would allow you to reduce your taxable income by the total amount donated, and you wouldn’t need to itemize your deductions to get the tax benefit.
Sometimes donating your time can be the most valuable resource you can give to a charity. Get in touch with local organizations and see what they need help with. Whether it’s volunteering to help at a one-time event or becoming a regular volunteer staff member, you’ll get the chance to make a difference for an organization you care about and see the impact you’re making first-hand.
Maggie Tomasek is the PR & Content Strategist at Alliant. She began her career as a journalist for newspapers in Utica, N.Y., Des Moines and Cincinnati before moving to Chicago in 2009. Maggie is an eight-time Chicago Marathon finisher and a lifelong creative writer with a passion for comedy. Her mom instilled in her a great sense of fiscal responsibility, and her big sister told her to throw that responsibility out the window every once in a while in the name of life experience. So far, that combination of financial advice has worked out pretty well for her.