Understanding Deductions for Charitable Donations 

thank you!

Thank you!

Line 15 is Taxable Income (on the 2022 1040). Adjusted Gross Income is/was on line 11. Deductions for cash charitable donations are limited to 60% of Adjusted Gross Income in 2023

Yes, it's definitely possible that those in higher tax brackets get a larger dollar amount of deduction benefit for donations. For example, if a high income person is in the 37% tax bracket and deducts a $30k donation, their tax savings will be 37% of $30,000. On the other hand, if a person in the 22% tax bracket deducts a $30k donation, that tax savings will only be 22% of $30k.

Super complex but would like to clarify further. AGI is theoretically 0 but may generate revenue through other sources but cost of boxes and donates may Trump the revenue.

@@CashCultura There is some gray area in this one. You first have to figure out whether the IRS would view your card opening business as an actual for profit business or just a hobby. Either way, the income you get from it is taxable. And expenses can reduce the amount of taxable income. But if it's a hobby, you can't end up with a net loss (or actually, you can't deduct that loss). If it's a business, you can deduct the net loss against other income. But even then there are rules regarding how many years you can have a net loss before the IRS basically makes you treat yourself as a hobby. This is a potentially complicated one, and what I mentioned above is definitely not specific tax advice. It would be best to reach out to a tax return preparer to formally engage him or her to assist with these questions and give you more refined answers that are applicable to your specific circumstances

Sorry, but I’m not sure

Money laundering via charities, did you learn that from your talmud?

You would have been able to get the $12,950 standard deduction anyway, even if you had no charitable donation. So if your only itemized deduction is that donation of $20k, then it's really only another $7,050 of additional deduction you're getting that you wouldn't have gotten anyway. But if you have other itemized deduction such as mortgage interest or state & local taxes, then those would add to the $20k donation such that your total itemized deductions would be higher than $20k and you'll end up getting more tax deduction bang for that donation

They’re separate and unrelated things. A Roth conversion will generally increase your gross income. A large donation to a DAF can reduce your taxable income.

No, in order to get the special $300 charitable deduction (on top of taking the standard deduction), it needs to be a cash donation.

@@RetirementPlanningEducation thanks.

If the recipient organization is in Guatemala and isn't a U.S. church and/or isn't otherwise a qualified 501(c)(3) charity in the U.S., that's correct that the donation isn't deductible on your U.S. tax return.

@@RetirementPlanningEducation Donated to a church in Savannah Georgia who’s taking the dresses to Guatemala

@@Smkwoo1663 And when you say you're donating them from your shop, do you mean you are in the business of selling the dresses and are looking to donate them out of your business as opposed to donating them personally?

@@RetirementPlanningEducation I am an owner of a formal dress shop. Yes I am donating from my business.

@@Smkwoo1663 It should ultimately be able to be deducted. BUT, depending on the value of the dresses donated, it may not be a large enough dollar amount that you actually get any tax benefit from the donation. Maybe that’s what your accountant meant. It would be best to ask him or her to clarify. There is a difference between simply saying they can’t be deducted vs they can potentially be deducted but not if the amount of deduction isn’t large enough to actually provide a tax benefit for you.

But then the question is why woulf you not claim that money that you got doing x. Sounds to me like earned income

Yeah, there aren't nearly as many people who can deduct charitable donations now as a result of the $10k SALT cap and higher standard deduction limits. For those who do regularly donate, it may be worth considering bunching up multiple years of donations into one year so as to potentially itemize at least in that bunching year

Contemporaneous Written Acknowledgment of the donation must be received before filing taxes.

If sum of itemized is larger than standard use that one to give you the lowest tax bill

Thank you!

Generally they need appraisals, especially for art. But for cars, the amount you can potentially deduct is the lesser of 1) the car’s fair market value (which you can get from a source like Kelly Blue Book) or 2) the price at which the charity sells your car

Unless you're itemizing your deductions (instead of taking the standard deduction) on your tax return, you're not directly recognizing any tax benefit from the $1,150 portion of the ticket that's treated as a charitable donation. Therefore, you're effective net cost for the ticket is the full $1,500, because you're not getting any special tax benefit or deduction for any part of the ticket.

It depends how many other itemized deductions you have in addition to the $5k charitable donation. Only if/when the sum of all of your itemized deductions exceeds your standard deduction do you actually get any tax benefit for those itemized deductions.

@@RetirementPlanningEducation I have just over 6,000 in charitable donations which are qualified. I had read if you have more than 5,000 you could itemize. That’s why I wanted to know if itemizing would help take away from my total due to the IRS? That’s all the donations I have. Thank you for answering me so quickly.

@@luannestrickland4199 It all depends how much other itemized deductions you have; there isn't any special threshold at $5k of donations. Other things that are itemized deductions are 1) unreimbursed medical expenses in excess of 7.5% of your adjusted gross income, 2) state and local taxes (included real estate taxes) up to $10k in total, 3) interest paid on the mortgage against your primary residences and 4) qualified charitable donations. If the sum of all of those itemized deductions is larger than your standard deduction (about $13k if you're single, or about $26k if you're married and file a joint return), then you'd itemize and get some tax benefit for your donations.

What’s a web application; some kind of software? I’m not sure. Donating goods is potentially deductible, based on the value of the good. But donating time or services isn’t. Therefore, I’m not sure how that would be treated. If it’s software someone else created and you’re buying it to then give it to the charity, I believe then it would be potentially deductible. But if it’s software you’re creating for them, then I don’t believe it would be deductible since you’d essentially be donating time and/or services

Unfortunately no. The carryover only applies if your deduction is limited because you hit one of the AGI-based limits on your charitable donation.

If it's only $200 in total for the year, I doubt that will ever get questioned. But if push comes to shove and it DOES ever get questioned, you'll need to provide proof of the donations, otherwise it's as if they didn't happen. And proof would need to be written acknowledgement from the church that they received said donations from you.

Yes, but it only carries over for five years. If not able to be used up in that time, you then lose the deduction.

100% of AGI line 15 is deductible? to QUALIFIED CHARITY

Unfortunately no. Providing time and/or services is not deductible, even if the services you're providing is your profession and something you'd otherwise charge for.

@@RetirementPlanningEducation ty for this.

Sorry, but I don't know the answer to that. I believe it needs to be registered in the U.S. as a U.S. qualified charitable organization to get a deduction on your U.S. tax return. But I don't know if there is potentially special treatment for certain non-U.S. charities or countries

@@RetirementPlanningEducation ok thanks for the help, Greetings from Chile!

If you don’t have other itemizable deductions (such as mortgage interest and state and local taxes) that collectively exceed the standard deduction, that’s correct…you don’t get any tax benefit from those donations.

@@RetirementPlanningEducation So let's say my state tax is 5K and select the standard deduction. How can I figure out the benefit? Sorry just a bit confused.

@@ricsric8814 Depends how many other itemized deductions you have in addition to the $5k of state income tax. If your only other itemized deductions are $2k in donations, for example, that's only $7k of itemized deductions, which is less than the $13k standard deduction. Which means there is no tax benefit for the $5k state tax or $2k donation because you're getting the $13k of standard deduction regardless. But on the other hand, if you donated $10k to charity and have $5k in state tax, that means your itemized deductions are $15k, which is larger than the $13k standard deduction. That basically means that you would have already gotten $13k in free deductions anyway thanks to the standard deduction. So it's really just that extra $2k of itemized deductions that you're getting extra benefit from. Which means it's really just $2k of that $10k donation that you're actually getting extra tax benefit for.

It also depends how many other deductions you have for the year. Unless the total of your "itemized deductions" (inclusive of your charitable donations) is more than the "standard deduction" that everyone is able to take, you won't directly get any deductible tax benefit for the donation anyway.

It will go on line 11 of Schedule A www.irs.gov/pub/irs-pdf/f1040sa.pdf

​@@RetirementPlanningEducation Hi, is very helpful information, but can deduct all $5,000 ? thanks

@@siuivy3827 it depends how many other things you have to deduct on Schedule A. If you don’t have a lot of things to deduct, you’ll end up using the “standard deduction” and you therefore won’t directly get any deduction for the $5k donation.

@@RetirementPlanningEducation I have sold my rental property in 2021 and I have short term share investement, so can I do it ? thanks

@@siuivy3827 the gain on the rental sale is unrelated to whether your itemized deductions (inclusive of your donation) will be larger than the standard deduction.