Itemizing your deductions can be a strategic way to maximize your tax savings, especially when it comes to charitable contributions. However, it can be challenging to surpass the standard deduction threshold, which is set to increase in 2023. For single taxpayers, the threshold will be $13,850, and for married individuals filing jointly, it will be $27,700.
One common tax-saving strategy is to itemize deductions such as home mortgage interest, medical and dental expenses, home equity loan interest, and state and local taxes. However, if these deductions do not exceed the standard deduction, you may be better off taking the standard deduction.
When it comes to charitable contributions, the rules are a bit different. You can't take charitable tax deductions without itemizing. This is where a strategy called "bunching" comes into play. Bunching involves combining multiple years' worth of charitable contributions into a donor-advised fund (DAF) in a single tax year to surpass the limit and itemize your deductions.
This is where Daffy, a donor-advised fund, can be a great option. With Daffy, you can easily bunch your charitable contributions. You simply contribute the amount you wish to bunch to your Daffy fund and immediately receive a tax deduction for that amount. Then, you can distribute the funds to your desired organizations whenever you're ready to give. This allows you to continue your annual charitable giving while maximizing your tax deductions.
By using Daffy, you can not only reduce your tax bill but also support the causes that are most important to you. If you're interested in learning more about how to maximize your charitable tax deductions, be sure to check out our complete Charitable Deductions Tax Guide.
Please note that this information is for educational purposes only and should not be considered tax or investment advice. To assess your specific situation, please consult with a tax and/or investment professional.
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Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.