One of the United States' largest problems is the national debt, which stands at $18.1 trillion. Yet most people don't realize they can actually donate to the government to reduce the national debt. Like most other charitable donations, donations to the U.S. federal government are tax-deductible. Read on to learn more.
The showdownIn the winter of2011-2012, Warren Buffett got into an argument with members of Congress over government spending and the national debt. Somewhat in jest, Buffett agreed to match any donations members of Congress made to reduce the national debt, up to 15% of his income.
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In the five preceding years, an average of just $2.5 million was donated annually. It didn't help that it used to be hard to donate. Taxpayers had to write a check payable to the Bureau of the Fiscal Service, Department G, and note that it was a gift to reduce the debt held by the public.
Given the attention Buffett drew to the issue, in 2012 the government launched a page on Pay.gov through which anyone can now make donations using their bank account, credit card, debit card, or PayPal account. If you were hoping to use a credit card to save the country, note that Pay.gov only allows donations of up to $999,999. Larger donations must still be made by check.
In 2012, gifts to reduce the debt held by the public jumped to $7.7 million. Gifts dropped to $1.8 million in 2013 but rose again to $5.1 million last year.
That said, those amounts are drops in the bucket compared to the U.S. federal government's national debt, which stands at over $18.1 trillion. (More precisely, that's eighteen trillion, one-hundred twenty-five billion, eight-hundred seventy-six million, and six-hundred ninety-seven thousand dollars -- writing it out helps you wrap your head around what an astronomical sum that really is.)
Gifts to reduce the public debtThere are two ways to contribute to reduce the debt. You can use Pay.gov or write a check payable to the Bureau of the Fiscal Service, and, in the memo section, note that it's a gift to reduce the debt held by the public. You can mail your check to the following address:
If you're donating to Pay.gov, you will receive a receipt by email. Receipts will be mailed to those who donate by check.
Donating now would reduce your 2015 taxes due on April 15, 2016, not your 2014 taxes due on April 15, 2015. Also, the normal limits on the tax deductibility of charitable contributions apply. For donations to the government, you can deduct cash contributions in full up to 50% of your adjusted gross income and carry excess donations over to future tax years for up to five years. You can deduct donations of intangible property up to 20% of your adjusted gross income. You can read the IRS' complete guide to limits on charitable donations here.
With the tax deadline just two months away, there are only so many ways you can still reduce your taxes for this year.Educate yourself on all your options so you can be smart about your taxes going forward.
The article The Patriotic Tax Deduction Few Americans Know About originally appeared on Fool.com.
Dan Dzombak was born in Boston but grew up in the real City of Champions. He made a patriotic donation but is not a Patriots fan.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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