Are you looking to save some money on your 2022 tax bill?
Let’s look at one way that can potentially help reduce your tax liability before the end of the year.
This is actually a two-parter.
Part 1 is for those people that know they will be itemizing their deductions.
Part 2 is for those people that think they will NOT be itemizing their deductions.
(If you don’t know what itemizing is, we really need to talk 😉.)
1) If you know you will be itemizing, charity can help reduce your tax liability.
But what happens if you have money set aside in an account for charity, but you don’t know which charity you want to donate to before the end of 2022?
A donor-advised fund may be the right option for you.
Basically, you send this money to a company that handles donor-advised accounts.
They immediately give you a tax deductible receipt for 2022.
Then, whenever you decide which charity you want to donate to (can be in 2023), you advise them where to send the money to.
You get your 2022 receipt AND get to wait until you decide where to donate.
2) If you think you will NOT be itemizing your deductions, you may want to think about “bunching” your donations.
Basically, this means that although you don’t qualify to benefit from charity in the current year (since you’re not itemizing), it’s possible that if you delay your current year’s charity giving to next year, you may qualify to itemize next year.
So, instead of giving $15,000 to charity in 2022 and $15,000 in 2023, you will give $30,000 in 2023.
You’ll at least get to benefit from the charity in 2023 rather than “wasting” it in both years.
As with all tax issues, make sure you speak with your tax professional before making any decisions.