Tis the Season to Save . . . On Taxes!

Everyone hates paying taxes.  We all accept it as inevitable but look for ways to reduce our tax liability.  Luckily for us, the IRS offers incentives in the form of tax deductions.  Some common deductions include charitable contributions, interest on your home mortgage, and interest on your student loans.  While you may have no control on when you pay your mortgage and interest, you do have control on when you make charitable contributions.

Basically we are talking about the time value of money.  You get the same tax deduction for your charitable donations whether you make them all in January, throughout the year, or all on December 31.  This allows you to use your money throughout the year instead of letting someone else use it.

Some people might want to make charitable deductions but are afraid that if they don’t make them in little contributions throughout the year, the money will be spent come December and they will lose out on the deductions.  If you are really serious about making charitable contributions but also not wasting your money, put aside the money you want for charitable contributions each month in a savings account.  This allows the money to collect interest, which you can use for yourself, or you can add it to your charitable contributions at the end of the year and get even more tax deductions.  Either way, you have the money to make your charitable contributions, you got the value of having the money for the entire year, and you still get your tax deductions.