What does it mean when they say your donation is tax deductible?

June 9th, 2009

Philanthropy can do more than just aid a worthy cause; in certain situations, generosity can reward the giver as well. Giving to charity can actually reduce the taxes you have to pay, but there are special conditions that have to be met first.

When you donate to charity, you’re spending money, right? So no matter how much money you make, you now have less of it to use. But even though donating to charity means you’re using your own money in a way you choose, you’re not using it to buy new things for yourself, you’re using it to benefit a worthy cause. As long as you donate the money to a qualified recipient – a person or organization the government trusts to use that money effectively – you have the right to be rewarded for using your own wealth to help others. So your donation becomes tax deductible, which means you have a lower adjusted net income.

To put it simply, when you donate to charity, you’re really getting two benefits at once: you’re helping your chosen organization and you’re also reducing your own income taxes.

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