Many personal finance columnists offer up the suggestion that donating to charity, especially towards the end of the calendar year, has its benefits.
This isn't just because of the spirit of the holiday season, but rather because there are tax benefits for many Americans when they donate to charity. For the approximately 15% of Americans who itemize their taxes, a charitable donation often means an additional deduction on their income taxes, meaning a charitable donation in December becomes a smaller tax bill in April.
How does all of this work? How can you tell if you're in the percentage of Americans who will see tax benefits from charitable donations? Let's start with the basics of income taxes.
You pay income taxes on your gross income
When you file your income taxes, perhaps the most important number that you use is your gross income. That's the total of how much you earned in a given year from everything that earned you money -- everything you earned from work, selling investments, unemployment benefits, child support and more.
From that amount, you're able to deduct some things. One of them is charitable donations. You can also deduct interest on your mortgage, some medical and dental expenses, and state and local income taxes, among many other things. One issue that many people will be dealing with since the pandemic pushed many employees to work from home is deducting home office expenses. Others who have leaned into small businesses and side gigs will want to understand small business home tax deductions.
Let's say Tammy makes $40,000 at her job and also earns $10,000 from a small side business she runs