Many of us struggle with giving to charity, not because there is a lack of opportunity, but because we are already struggling with so much in our own lives that it is difficult to set aside any time or money for anyone else. As a result, we can usually only spare a small amount anyway, which we write off as not being enough to make any relay difference. However, if you can only spare $10 or $20 to give to charity once a month, or once every six months, don’t look at it as a low denomination note, look at what that money could buy and the difference it could make. You could be giving a family a bag of flour or a bowl of soup. You could be making sure children have a blanket or shoes, and when you look at it like that you’ll see the real value that your donation can bring.
When you really look at it, there are numerous benefits of giving money to charity, for yourself and for others, but if you still need some convincing, read on.
The Value of Giving
It is easy to see the benefits of giving money to charity, but what actually motivates us think and care about others and give away what is our to help them? Many believe that giving is simply motivated by our deep need to find meaning in life and because for many meaning is deeply entwined with community connections, we can feel a sense of connection and purpose by giving to others.
Of course others argue that we have only selfish motivations for giving. According to Maslow’s hierarchy of needs, which is a central theory which drives human behaviour, we find that we are all driven by items which benefit us, and once these needs are met – food, sleep, security – then we are driven by the desire for self actualisation. Self actualising people will embrace the facts and realities of the world and of themselves, they are spontaneous, creative and interested in solving problems, including the problems of others. This problem solving is often a key focus in their lives and they feel a closeness to other people, and generally appreciate life.
These self actualising people have a system of morality which is fully internalised and not affected by external authority and as a result they can view all things in an objective manner. While the exact motivation of each giver is unique, what is good for the community is good for the individual because if you live in a thriving and happy community you too will be happier. Therefore, in the same way that we eat to satisfy our desire to live, we give to satisfy our desire for meaning.
1 – Tax Benefits of Giving Money to Charity
While giving to charity is all for a good cause most of us realise it can also be used as a tax deduction. You can usually write off the amount of money you give to charity each year when you do your tax, and if you give enough you could be able to offset a significant amount to enjoy a significant tax return. The exact amount you can claim back will depend on how much you earn and what tax bracket you are in, but there a number of ways you can give to charity in a tax efficient way:
Give to a registered charity. To be able to claim your donations you need to be giving to a recognised charity, which you can check by asking the charity for their reference number.
Give direct. You can give money to a charity directly from your pay or your pension using a payroll giving scheme. This system actually costs you less because your donation comes out of your gross salary before any tax is deducted so you don’t pay tax on the donation amount. You can give to any number of charities using this method.
Income tax reduction. You can lower your tax bill at the end of the financial year by giving land or buildings that you own, or certain types of shares to a charity, or selling them to a charity at less than their market value.
Capital gains tax reduction. You will pay capital gains tax on any gain or profit you make when you sell or give away something which you own. Therefore, you can qualify for a reduction in your capital gains tax by giving an asset to charity or selling an asset to charity for less than its market value.
Leaving gifts to charity in your will. Anything you leave to a charity in your will, will not be included in the total value of your estate when calculating inheritance tax. Gifts made to charity seven years before your death are also exempt from inheritance tax.
Donate tax refunds. If you complete your own tax return you can donate any tax refund you are eligible for to the charity of your choice.
To make sure that you can reap all of the tax benefits of giving to charity in any way you choose, you will need to keep records of all of your donations. This helps ensure you claim the correct amount for your donations, and the information you will need includes:
The date of the donation, the amount given and the names of the charities.
Any legal documents relating to the sale or transfer of assets to a charity.
Any documentation from a charity asking you to sell land or shares on their behalf.
2 – Status of Donations
Many people give to charity to be seen giving. You see this a lot in very wealthy circles, where people will make large donations, host charity balls and seek donations for others on behalf of their chosen charity or cause. These people don’t donate anonymously, instead they make sure they get something very tangible from the donation, whether that is their name on the new hospital wing they donated the build money for, or recognition in print, newspapers and newsletters.
3 – Family Reasons to Donate
There are so many charities out there that it can be hard to choose which cause you will support. For some people they are drawn to support a cause working for a mission their family has also been touched by. For example, someone whose brother died of Alzheimer’s may donate to an Alzheimer’s charity, someone who has recovered from breast cancer may donate to a breast cancer charity.
In this way people feel as though they are connecting with their family members again, and they feel they are able to make a real difference, remembering the charity or the assistance which was there for them when they needed it.
4 – To Make a Difference to Others
To choose a cause to donate to, some people will look at exactly who they are helping and why. For example, some people are motivated to give donations to their alma mater to support other students with the same passions as themselves. Others will give to their church or faith based charities because they want t align themselves with a charity which shares their religious beliefs.
It is important for some people to support their local community so that they know they are helping in a way where they can see that their donation really makes a difference at a grass roots level.
5 – To Make a Difference to Yourself
Giving to charity is a very personal thing, because you are parting with your hard earned money and giving it to someone you will probably never see, and someone who can’t ever thank you for your donation. However, this can also be an important benefit of giving to charity, because it does feel good to do something for someone else less fortunate. That feeling also lasts long after the donation has been made and you have not only made someone else’s life a little brighter, you’ve also brightened your own.
Giving money to charity can benefit you personally in a number of ways by making you feel like you’re a positive member of society and increasing your self esteem, by reminding us that there is someone worse off than we are and that we should be thankful for all that we do have. When you go through your closets and cupboards to clean out everything you no longer use and give it to a charity you have the benefit of reflecting on where you have come from, and all of the great memories your life has been filled with.
Donating to charity can also remind us of the importance of being kind and generous, and we are likely to remember that feeling and add kindness to other aspects of our lives – whether we hold the door for someone coming behind us, let someone with crying children in front of us at the checkout or drop in on an elderly neighbour to see how they are.
Many businesses are also encouraging their employees to feel the benefits of giving by organising charity events as a team. These could be fun runs or marathons where employees seek sponsorship for running certain legs of the event, or holding a quiz night where nomination money is given to charity. This is a great way to promote team work in the office as well as raising the status of the company through their generous donations.
Alban has been writing about money and finance for the last 3 years. He has contributed to hundreds of personal finance blogs and is a regular writer at Personal Loan Finder
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