There are a lot of benefits of budgeting, and tracking your spending—I mean, obviously, which is why I won’t shut up about them.
But one of the biggest, that I don’t talk about as often as I probably should, is that when you know how much you spend, you also know how much you have left over every month. And when you have money left over, you can do fun things like give it to charities you care about.
True confession: this year is the first year I feel like I’ve Gotten It Together with my charitable giving. I knew how much I wanted to give, and I made a point of setting up an automatic monthly contribution to one of my favourite causes (and next year, I’m adding another one to the list).
What let me do all this was tracking my spending.
What prompted me to do it? (You’re about to think I’m more of a nerd than you already do, trust me.)
Filing my taxes.
See, I love filing my taxes, and if you didn’t know this, you actually get a tax credit in Canada for donating money to charity. (This might be true in other countries? I can’t know more than one tax code pals, no one who isn’t a professional tax person should ever have to do that—and if they do, you should pay them a lot of money probably.)
Anyways, here’s how it works.
- You make a donation to a registered charity this tax year (which ends on December 31st, 2018)
- You claim that donation to a charity on your tax return when you file in the spring (tax software will almost always make this painless)
- The government treats that money as if it wasn’t taxed, to reward you for supporting awesome causes—so you get back the tax you paid to earn the money in the first place
Here’s a quick example to show you how this works.
If you donated $1000 in cash this year and your income was $50,000 (aka my favourite it’s-not-absurd-to-think-a-millennial-could-earn-this-salary number) you’d get $262.00 of that money back on your federal taxes.
You would get back a solid chunk of the money you gave to charity this year.
If that’s not a reason to add “give back” to your holiday to-do list, I mean, I don’t know what is. The government is essentially giving you cash back on your donation, up to the amount of your marginal tax rate.
A word of not-advice
As usual, my standard disclaimer is that taxes are heckin’ complicated, and none of this should be considered tax advice for you. It’s just information I thought would be handy, especially since we’re coming up to both the most important fundraising season for your favourite charities, as well as the end of the tax year.
So in the spirit of not-advice, I want to not-advise you to consider adding a few donations to your holiday shopping list if you’ve got some extra money lying around and want to get some of it back at tax time. I’d also not-advise you that the deadline to make any donations you want to claim on your 2018 taxes is December 31st, 2018.
And then I’d actually-advise you to get intentional with your charitable giving, figure out which causes are close to your heart, and set up a recurring monthly donation to them starting in January.