How much should you donate to charities and other worthy causes? There is no one single right answer to this question, of course. But finding the right number for your particular situation may feel harder than it should be. You don't want to be stingy, but you don't want to give more than you can afford either.
So, how can you decide on the right amount to give to others? Here are five factors that you might weigh to make your own call.
1. Your Monthly Budget
Donations should be part of your overall spending plan, just like any other expenses. This means fitting them into your budget and giving what is realistic within your limitations. If your income doesn't support as much financial giving as you'd like, consider other ways to contribute, such as volunteering.
h2>2. The Tax Benefits
While donating financially should be about the doing of good, there are some practical considerations.
First, take advantage of tax benefits for charitable giving. All taxpayers have access to the income tax deduction for charitable donations, which reduces their taxable income. The standard deduction for a single taxpayer in 2020 is $12,400. But if you have other significant itemization deductions — such as medical expenses or mortgage interest — you may be able to boost deductions by more charitable giving.
In addition, giving through your company or partnership can net tax benefits for it or for the owners. And gifting appreciable assets can help reduce the tax bite that comes from selling these instead.
3. Your Motivations
Charitable giving should be primarily the result of the right motivations. What motivates you to want to give money you've worked hard to earn? Are there specific causes you feel particularly strong about? Are you more motivated during times of economic crisis or natural disaster? Do you feel it's important to pay religious tithes? Do you want to leave a legacy? Do you like to give anonymously or get recognition?
Examine why you want to give and what makes you happy to help you decide when and how to do so. Donating in the right ways for your personality — such as by focusing on one cause important to you — can help you feel more generous even when you can't give or volunteer as much as you'd like.
4. Regularity of Giving
People often donate on a regular basis, particularly now that most charities can accept recurring automatic donations. But some people feel more motivated to give during certain times of the year or during particular campaigns.
If you know that you'll have more opportunities to donate during the holidays, for instance, you may want to focus your money on that time. Recurring donations, on the other hand, can make it easier to give larger amounts that are spread out rather than donated all at once. Your charitable habits inform how and when to give.
5. Future Estate Plans
What charitable giving is in your estate plans? A person who plans to give generously of their future estate may feel less pressure to give too much now. If you have no direct heirs, for example, you may choose to care for your own needs now and leave significant assets to charities when you pass away. But if you want to have the joy of giving, doing so now could be more important than including it in your estate.
As you consider all the factors — both practical and emotional — involved in how you like to donate to charities, the right dollar amount will become clearer. And no matter what that amount is, the best way to execute it is with the help of an experienced financial planner. At Presidio Wealth Management, we can help you make generosity part of your present budget and your future plans. Make an appointment today.