If you “round up” your purchases to the next dollar at checkout and donate the change to charity, you might save some money on your taxes – but it could take 23,326 shopping trips in a year.
Donations and Taxes
Donating to charity is an effective way to raise money, as research has shown that it does not require much money from the shopper, and these small donations accumulate for the organization.
The Impact of Donations on Taxes
When you make charitable donations to qualified organizations, you can deduct them from your taxable income on your federal tax return. In theory, this seems to help you save money. However, when you analyze the situation, it may take a long time as it affects your tax bill.
Details on Tax Deductions
To be able to deduct charitable donations, you must itemize your taxes. It only makes sense if all your tax deductions exceed the standard deduction, which was $12,950 for individuals and $25,900 for married couples filing jointly in 2022. According to research from the Nonprofit Tax Foundation, taxpayers in the middle-income bracket can claim an average of $1,288 in deductions for things like healthcare expenses, charitable contributions, and local and state taxes – which is much lower than the standard deduction.
Charitable Donations and Tax Benefits
If you are filing your taxes as an individual and you are deducting $1,288 as tax deductions, you will need to make additional charitable donations of $11,663 to make itemizing your taxes worth more than the standard deduction. For the purposes of this example, let’s assume that the donations made at checkout average 50 cents each. That means you need to round up your purchases 23,326 times. (No wonder that only 5.5% of middle-income taxpayers itemize their deductions, according to estimates from the Tax Foundation.) After surpassing the standard deduction threshold, charitable donations reduce tax bills faster, but it still amounts to just a few dollars each time.
Donations and Taxes
Although rounding up your purchases at checkout may take a long time because it affects your taxes, it remains a simple and great way to donate money for charitable causes. And if you are doing tax moves at year-end, it’s time to donate to your favorite charities, consider whether you will itemize your taxes or take the standard deduction when filing in the spring, and make contributions to your retirement account if you haven’t already reached the annual limit.
Do you have a question, comment, or story you’d like to share? You can contact Deacon at dhyatt@thebalance.com.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts in our articles. Read our editorial process to learn more about how we verify facts and maintain the accuracy, reliability, and quality of our content.
Engage for Good. “2021 America’s Charity Checkout Campaigns.”
IRS. “Topic No. 506 Charitable Contributions.”
IRS. “IRS Provides Tax Inflation Adjustments for Tax Year 2022.”
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