Top 5 Benefits of Donating to Charities for NM Residents
Americans are known for their generosity. In 2021, we gave over $400 billion to various not-for-profit organizations across the country and around the world. And who is the largest source of charitable donations? Not big corporations, not foundations, but individuals. Here in New Mexico, our residents are also very generous and community-minded. Learn about the financial and other benefits of donating to charity and get started today.
1. Potential Tax Benefits
Tax deductions reduce your total amount of taxable income. Under the 2017 Tax Cuts and Jobs Act (TCJA), the standard deduction was nearly doubled, decreasing the number of tax filers who itemize deductions. As of 2022, the standard deduction for your federal tax return is $12,950 for Single filers and $25,900 for Married Filing Jointly.
Generally, you can only deduct charitable contributions if you itemize deductions instead of taking the standard deduction. So, depending on your tax status, it may be more advantageous to take the standard deduction instead of itemizing. Talk to your tax advisor about your specific situation.
Before donating to a specific charity, make sure it’s a “qualified organization” under the IRS’s definition. This includes “nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.” Only contributions made to qualified organizations are considered tax-deductible.
You should also keep good records if you plan to itemize charitable donations for a deduction. Monetary gifts must be recorded via bank statement or written communication from the organization you supported.
Beyond cash donations, you can also donate property and deduct the fair-market value. For contributions of $250+ in cash or property, you need a “contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed.”
2. Better Budgeting
While you can always make a one-time contribution to your favorite charities, a monthly recurring donation may help you with money management and budgeting. It also helps charitable organizations plan and budget for the year.
Have you wanted to make charitable donations but you weren’t sure you could afford it? Instead of making a spontaneous donation when you hear or read about a certain cause, set your intentions in advance by thinking through the cause or causes you care most about. Then figure out how much you can afford to contribute monthly–even as little as $5/month will add up to a larger amount by year’s end. Making a smaller monthly contribution can be easier to budget for than a one-time bigger contribution at year’s end.
Donating to charity can make you feel wealthier, as well as altruistic. Treating your donations as another monthly bill or expense helps you be intentional with your values and money, while staying on top of your other bills and expenses so you don’t jeopardize your own finances to help others.
3. Community Improvement
As a member-owned, not-for-profit financial institution, Del Norte is dedicated to improving lives in the New Mexico communities we serve. We created The Del Norte LOV Foundation to promote financial literacy and improve the lives of New Mexico’s youth and families.
Of course, there are many ways to help your New Mexico community. Think about the issues you’re most passionate about, whether that’s helping animals, empowering women, getting more books in kids’ hands, etc. There is likely a charity doing the work you are interested in, so you can align your charitable giving with your values. Search Northern New Mexico charities here.
4. Altruistic Kids
If you have children, you probably want them to grow up with certain values such as generosity and appreciating what they have. As the saying goes, actions speak louder than words. Get the whole family involved with making donations and deciding where to send them. For example, you could keep a change jar to be divvied up at the end of the year. If your child receives allowance money or cash gifts on holidays and birthdays, invite them to contribute some of their earnings to a charity of their choice. Especially during the holidays, it feels good to give as well as to receive.
5. General Well-Being
If you’ve volunteered or given money to a charity before, you already know–generosity feels good. Research shows that giving someone else money or time instead of spending it on yourself can make you happier, reduce your stress, and even boost your longevity. It makes sense that focusing on others will help take your mind off your own worries and connect you to your broader community. Humans are social creatures and we want to feel connected and helpful to others.
How To Get Started
Now that you’re on board with the benefits of charitable giving, find a way to get started that fits your budget and your life.
Recurring Monthly Donations
Sign up for a recurring monthly donation that you can cancel at any time. Any amount helps and you can always start small–will you really miss $5/month? If you work for a larger company, they may even offer a charitable matching program, increasing your impact.
With inflation driving up the cost of food and household items, food banks are in need of donations of canned goods, pantry staples, cleaning supplies, baby items, and more. Check your local pantry’s website or social media page for a list of current needs.
Do you have unwanted items in wearable or working condition sitting around your house? Donate clothing, furniture, and household items to Goodwill or another thrift store and you can request a receipt for the fair market value of your donation.
There are charities specifically around car donations, but you can also donate your vehicle to many non-profit organizations. If they sell it, you can deduct the sales price they report. Otherwise, you can deduct the fair market value of the car.
At age 72, you can make charitable donations of up to $100,000 from your IRA. Whatever you donate is exempt from federal income tax and also counts toward your Required Minimum Distribution.
New Mexico State Tax Credits
Through the New Mexico Mortgage Finance Authority (MFA), you can receive a state tax credit in return for donations to help build affordable housing in our state.
Learn more about charitable giving!
In addition to offering the benefits of tax advantages, better budgeting, community improvement, altruistic kids, and general well-being, charitable giving is also an essential part of estate planning. Del Norte proactively gives back to the community and supports local foundations through our Community Sponsorship Partner Programs. Interested in getting more involved locally? Learn more about The Del Norte LOV Foundation.
Disclaimer: This article is for informational purposes only. For advice regarding your specific financial situation, please consult a financial planner or a trusted financial professional.