Money Management

Making a donation is a great way to help people in need, and it could benefit you too. Here’s what you need to know about the charitable donation tax deduction. 

Giving Tuesday is just around the corner, and while this day isn’t as well known as Black Friday or Cyber Monday, it also promises savings of a sort. This day encourages people to donate to charities on the Tuesday after Thanksgiving — and possibly earn some valuable tax breaks in the process. Here are five things you need to know if you plan to claim a charitable donation tax credit this year.

1. Your donation must be to a qualifying tax-exempt organization

To claim a tax deduction, you must donate to a tax-exempt organization. The IRS maintains a search tool where you can verify a charity’s tax-exempt status before donating to it. You can search by name, Employer Identification Number (EIN), or location.

It’s always a good idea to check this, especially if you’re working with a charity you’ve never donated to before. Charity scams are also popular at this time of year, so make sure you’re not giving your money away to the wrong person.

2. You need to keep records

You aren’t required to submit proof of your donation to claim a tax deduction for it, but you need that record somewhere in your files. If the IRS chooses to audit you and you don’t have proof, it can disallow the deduction.

The type of proof you need depends on the type and amount of your donation. Here’s a brief overview:

Cash donations under $250: A bank statement, canceled check, or credit card statement is enough.Cash donations of $250 or more: You need a written acknowledgement of the donation from the charity that states the amount and date of the donation.Noncash donations under $500: You need a receipt from the charity stating what was donated and when.Noncash donations worth $500 to $5,000: You’ll need to fill out Form 8283 and submit it with your taxes.Noncash donations worth $5,000 or more: You’ll need to fill out Form 8283 and have a qualified appraisal of the donated items.Out-of-pocket expenses related to volunteering: You must keep the receipts for these expenses.Mileage: You must keep logs of your mileage, including the dates, destinations, and purpose of your trips.

If you have any questions about what kind of proof you need to claim your tax deduction, reach out to a tax professional before donating.

3. You have to itemize your deductions

Most tax filers use the standard deduction. As the name implies, this is a standard amount that everyone of your tax-filing status is allowed to deduct from their taxes. But you can also itemize deductions if you choose. For some, this could result in greater savings than claiming the standard deduction, though this isn’t true for most people.

You must itemize your deductions if you hope to claim a tax break for your charitable donations. If you opt for the standard deduction, you won’t receive any financial reward for your charity.

4. You have to subtract the cost of any items you receive in return

If you donate money to a charity and that charity gives you a T-shirt in return, then you must reduce your charitable donation tax deduction by the value of that T-shirt. So if you gave $50 and the T-shirt was worth $15, your deduction would only be worth $35.

For this reason, it’s important to keep records of any items you receive in exchange for your donation, as well as the items you donate. If you have any questions about the value of any items you receive, ask the charity for more information.

5. You can only claim deductions on up to 60% of your adjusted gross income (AGI)

This rule isn’t relevant to you unless you plan to donate a substantial amount of your annual income. But if you’re feeling ultra-generous, it’s crucial to keep track of how your donations stack up to your income for the year.

You cannot claim a tax deduction for cash donations that’s worth more than 60% of your adjusted gross income (AGI) for the year. And for non-cash donations, the maximum tax deduction is 50% of your AGI.

Even if you don’t wind up with a tax deduction, donating to charity is still a worthwhile cause. If you have a little extra cash in your budget, unused items, or even a car that you think could benefit those in need in your community, consider donating it on Giving Tuesday.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More 

Many consumers have credit card debt. Find out if this is something to worry about and what you can do about it. 

When you have credit card debt, it can start to feel like a regular part of life. You use your card, you make payments, and your balance goes up and down. Over time, you get used to carrying a balance.

People in this situation sometimes wonder if it’s normal to have credit card debt. The answer: Statistically speaking, yes, it’s normal. But in this case, normal isn’t good.

Credit card debt is a common issue

Credit card debt is as normal as it gets in the United States. According to the latest credit card debt statistics, the average debt amount is $6,365. It’s worth noting that the median amount is much lower at $2,700. That means the median is likely more representative of the typical person’s credit card debt.

The fact that credit card debt is so common doesn’t make it any less of an issue. Most credit cards have high interest rates, and they’ve been on the rise. The average credit card interest rate is a staggering 22.16%. If you have $2,700 in debt at that interest rate, it will cost you about $600 per year in interest.

Paying that much interest makes it hard to get ahead financially. That’s why credit card debt often leads to more problems, including:

Not being able to save or invest any moneyNot having enough money to pay all your billsNeeding to borrow more money to cover your living expenses

It can also negatively affect your credit score. One of the key factors in your credit score is your credit utilization. This is how much of your credit limit you use. Generally speaking, using more than 30% of your credit limit lowers your credit score. For example, if you have a $4,000 balance and a $5,000 credit limit, you’re using 80% of your credit. That would have a large negative impact on your credit score.

What to do about credit card debt

If you’re in credit card debt, the first step to take is to make a plan to pay it off. It’s easy to fall into a cycle of using your card, staying current on the payments, but never actually making any progress on the balance. People who do this often find themselves getting deeper and deeper into debt.

Here’s how to get started:

Stop using your credit cards. When you’re getting charged 20% interest or more, you don’t want to keep adding to your debt.Figure out how much you can pay per month toward your cards. Put all your extra money toward debt, and cut costs where you can. The more you pay, the faster you’ll get out of debt.See if you can refinance your debt. If you have good credit, you may be able to qualify for a balance transfer credit card. These have a 0% intro APR on balance transfers, meaning credit card debt you transfer over, so they can help you save quite a bit on interest. Debt consolidation loans are another option.

The key is paying as much as you can toward your debt. If you only make the minimum payments due, it could take decades to pay off your card’s balance. Because minimum payments are such a small portion of your bill, they barely even cover the interest charges.

Consistency pays off for getting out of credit card debt. Let’s say you have $5,000 in debt at a 22% interest rate. If you’re able to commit to paying $300 per month, you’ll have it paid off in 20 months — less than two years from now. If you can bump that up to $400 per month, you’ll have it paid off in 14 months. You can run the numbers yourself on your exact balance with The Ascent’s credit card interest calculator.

Considering how many people have it, credit card debt could be considered normal. That doesn’t make it any less stressful or damaging to your personal finances. No matter how much credit card debt you have, prioritize paying it off so you can free up your money and stop getting charged interest.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More 

If you live with others and stream your music, don’t miss out on extra savings. Find out which music streaming services offer affordable family plans. 

Many music lovers use streaming platforms to stream their favorite artists and songs. But they may be overpaying if they subscribe to an individual streaming plan. Did you know you can save money on your favorite music streaming platforms with the help of family and friends?

If you live with family, roommates, or chosen family members, why not take advantage of the opportunity to share the load of the price of music? Subscribing to a shared family plan with one of the top music streaming apps allows you to do that.

Let’s take a closer look at three streaming services that offer savings for families.

1. Spotify Premium Family: $16.99/month

Spotify has several ad-free premium plans, including the Premium Family plan. Six users can join forces under one Premium Family plan if they live under the same roof. Premium Family costs $16.99 monthly. That’s a stellar deal, considering an ad-free Premium Individual account costs $10.99 per month.

Individual users can link their accounts to a Premium Family plan. Since each user connects to the shared plan but maintains a separate account, your siblings or kids can’t accidentally delete the playlist you spent your whole Saturday working on. And no one’s feelings will get hurt, since their potentially questionable music taste remains private.

While linking an individual Spotify account to a shared Premium Family plan, you’ll be asked to verify your address. Your address must be the same as the plan manager’s. All linked users can enjoy the millions of songs and podcasts the platform offers, with unlimited skips and zero ads. At this affordable price, the plan manager won’t end up with an expensive credit card bill.

2. Apple Music Family: $16.99/month

Apple Music is another service that can help families keep more money in their bank accounts. An Apple Music Family music plan supports up to six users for a monthly cost of $16.99. For comparison, the Apple Music Individual plan costs $10.99 per month.

Apple users who enable family sharing through their device settings can connect to an Apple Music Family plan. Each user will have access to over 100 million songs. Family members can also share playlists.

One thing that sets Apple Music Family apart from Spotify Family is users don’t have to reside at the same address. However, each user’s Apple ID must reside in the same iTunes Store region. So if you’re in the United States, but your sister lives in France (like mine does), she’s out of luck and will need to pay for her own individual plan.

3. Pandora Premium Family: $14.99/month

Pandora is another music streaming app to explore if you’re looking for family-friendly plans that offer savings. Pandora Premium Family allows six users to join for a monthly price of $14.99. An individual Pandora Premium account costs $9.99 monthly, making this a great deal.

Pandora Premium Family plan members must live at the same address.

Pandora may be known for its music stations, but their premium accounts are designed similarly to other music streaming services, giving you more access to the music you love. You can listen to ad-free content and get unlimited skips. Like with Spotify and Apple Music, each person can maintain their account, and family members don’t need to share their music unless they choose to.

Family music streaming subscriptions offer significant savings

We’re all looking to save a little more these days without giving up simple pleasures like access to streaming music. You can continue to treat yourself while working to meet your personal finance goals. Team up with your immediate or chosen family and save a few bucks on the tunes you love.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

 Read More