How do tax deductions work with charitable donations?

Question

Need wallet.org says “In general, you can deduct up to 60% of your adjusted gross income via charitable donations, but you may be limited to 20%, 30% or 50% depending on the type of contribution and the organization.” but I don’t know what those words mean 😆

In: 9

Answer 1

“Deduct” means “take off.” The amount of income tax you pay is calculated as a percentage of how much money you earned before expenses (your “gross” income). If your gross income decreases, then so does the amount of tax you pay. Tax laws usually let you reduce your “taxable” income by the same amount as any money you give to charity (which you can prove by keeping the receipts).