No good deed goes unrewarded. This is even true as far as the tax man is concerned.
As human beings we are compelled to help those who are less fortunate than ourselves. It makes us feel good inside when we are able to help a family in trouble, donate money to the church, or donate our old clothes to the Good Will. But did you know that these acts of kindness can actual lower the amount of taxes that you pay?
Tax credits are given by our government to encourage and reward acts of kindness and donations to charitable organizations.
Tax credits in many ways are better than tax deductions. You see… a tax deduction is a method that lowers your taxable earned income. For instance, a tax deduction could be the interest you pay on your house, or the contributions you make to your employers 401(k) plan. With lower earned income, you pay less tax.
A Tax Credit on the other hand, does not require you to lower your earned income to receive a reduction in the taxes you pay. You simply calculate how much you owe for taxes and then subtract the tax credit from the total.
For tax year 2006 , taxpayers filing as single and unmarried head of household have a maximum credit amount of $200. Taxpayers that are filing as married filing joint have a maximum credit of $400. Taxpayers filing married filing separate have a maximum credit of $200. What this means is that if you contribute to a charitable organization you can take anywhere from $200 to $400 off the amount of taxes you owe to the government. Where else can you get a deal like that?
As always check with your accountant or tax professional for advice on making charitable donations and tax credits. However, tax credits are available to everyone and are fairly straight-forward.
Charitable organizations help thousands of people every year have a better life. Who knew that in helping them do their job, you too could benefit. I pays to help others.