Let’s get this one out of the way first. Charitable giving offers a tax benefit when you itemize your deductions. For tax years 2020 and 2021, the IRS allowed a $300 above-the-line deduction for charitable donations, but in 2022 and moving forward, you need to itemize to take advantage of the tax benefits.
However, for those who have other itemizable expenses, such as mortgage interest, adding in charitable donations can further reduce your taxable income — leading to a lower tax bill.
2. Understand Your Financial Priorities
One reason it’s so challenging to stick to your financial plan is often that you haven’t taken the time to understand your values. Deciding to take a step back and consider whether your financial choices align with your values can be an excellent way to know yourself and understand your priorities.
If you wish you could do more to give, but you never seem to have the money, that’s a sign that some of your spending might not align with your values. By deciding to make charitable giving a budget priority, you’re forced to consider how you use your money and whether it reflects your true priorities.
Once you have your financial priorities in alignment with your personal values, you’re more likely to make better overall money decisions that help you reach your goals.
3. Get Better At Budgeting
Better budgeting goes hand-in-hand with understanding your priorities. Plus, if you want to make room in your budget for giving, you need to re-examine the situation. By articulating what matters to you and then creating a budget where maybe you put $50 toward a charity of your choice instead of eating out one night a month, it forces you to take a more disciplined look at the rest of your budget.
Are there areas where you’re spending on things that don’t matter to you? Deciding to add charitable giving to the mix can make a big difference in helping you create a budget that works for your finances and reflects what matters most to you.