Save Taxes – Community Service Tax Deductions

Posted on 30 September 2011

Save Taxes – Community Service Tax Deductions: Many people think of community service as something that is just a good thing to do. And yes, that’s quite true. We’re definitely not here to tell you that community service is a bad thing. However, there are definitely some other reasons that community service can help remedy some tax issues as well. Don’t be shocked to see that there are ways to save taxes by performing community service.

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Again, please don’t use this article to merely save taxes. This is just an added perk that can come for doing something good for your community or for a charitable organization.

If you don’t own a home and don’t have huge amounts of medical expenses, you probably don’t have enough to itemize your deductions. Don’t know what that means? Let’s go through a short tax lesson.

The government allows you what is called a standard deduction when you file your tax return. In 2011, if you are single, your standard deduction is $5,800. If you are married, you and your spouse have double that at $11,600. Senior citizens over the age of 65 get an extra $1,150. You are allowed the best of your standard deduction or itemized deductions.

So what makes up your itemized deductions? The three big numbers are always medical expenses (though a percentage of your medical expenses don’t count towards this), your mortgage interest and real estate taxes. Safe deposit box fees, tax preparation fees, union dues, and sales taxes or state/local income taxes also count in your itemized deductions.

However, the one thing that we haven’t discussed yet is community service. Any cash contributions that you make are a part of your itemized deductions, but that means money going out of your pocket to get a tax break. For example, if you are in a 20% tax bracket, if you donate $500 to charity and have enough to itemize your deductions, you’d be saving $100 in taxes.

What about non-cash items? The truth of the matter is that you aren’t using all those clothes in the back of your closet any longer. If you get rid of them by donating them to charity, you can get some deductions for them (up to $50 per bag of clothes). Sure, when you think about it, that’s only $10 of actual tax, but if you were just going to throw all of those clothes out, you may as well collect the $10 that Uncle Sam is going to give you.

The same is true about mileage for community service. If you drive to perform some community service, you’re entitled to $0.14 worth of deductions for every mile that you drive. Sure, if you drive 100 miles, you’re only entitled to $14 off of your taxable income, which does only translate into $3 off in taxes… but every single dollar saved in taxes is another dollar in your pocket.

We know that saving money in taxes isn’t the sexiest way to save money, but we also know that every dollar you can save is a dollar that you can put towards some other expense or investment in your life. Save money with community service today!