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 😆
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Basically, the government wants to make charity easier and cheaper. If you give ten dollars to charity, you won’t pay taxes on ten dollars of your income. 60% is just the limit of tax-free money you can donate, and in some case is even lower
“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).
Basically, the government wants to make charity easier and cheaper. If you give ten dollars to charity, you won’t pay taxes on ten dollars of your income. 60% is just the limit of tax-free money you can donate, and in some case is even lower
Basically, the government wants to make charity easier and cheaper. If you give ten dollars to charity, you won’t pay taxes on ten dollars of your income. 60% is just the limit of tax-free money you can donate, and in some case is even lower
“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).
“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).
So that’s saying that if you earned $100k, you could donate and take a tax deduction for up to $60k in donations, but certain donations would be limited to $20k-$50k in donations deducted.
The amount you deduct means you don’t pay taxes on that amount, so if you did deduct $60k of your $100k in income, you’d save about $13k in taxes, with the net effect of your bank account being about $47k lighter (60-13).
For smaller scale donations — the kinds most people make — they’d only be deductible if other deductions were enough to itemize deductions vs. taking the $12,900 standard deduction.
So that’s saying that if you earned $100k, you could donate and take a tax deduction for up to $60k in donations, but certain donations would be limited to $20k-$50k in donations deducted.
The amount you deduct means you don’t pay taxes on that amount, so if you did deduct $60k of your $100k in income, you’d save about $13k in taxes, with the net effect of your bank account being about $47k lighter (60-13).
For smaller scale donations — the kinds most people make — they’d only be deductible if other deductions were enough to itemize deductions vs. taking the $12,900 standard deduction.
So that’s saying that if you earned $100k, you could donate and take a tax deduction for up to $60k in donations, but certain donations would be limited to $20k-$50k in donations deducted.
The amount you deduct means you don’t pay taxes on that amount, so if you did deduct $60k of your $100k in income, you’d save about $13k in taxes, with the net effect of your bank account being about $47k lighter (60-13).
For smaller scale donations — the kinds most people make — they’d only be deductible if other deductions were enough to itemize deductions vs. taking the $12,900 standard deduction.
As other’s have said, the basic deal is that if you donate $1 to a charity, the government agrees to deduct $1 from your tax bill at the end of the year. It’s not like you’re get free money out of the deal, it’s more like you never earned the money to begin with.
A dumb example would be I earn $10 and the Government takes $2 out of my paycheck for taxes, so I have $8 left. I then give that $8 to a charity and at the end of year the Government says, “oh you donated that? Here’s your $2 back.” So again, not free money, it’s just not hurting me.
Now, depending on the type of charity you are donating to, there are maximum amounts in this offer. It gets complicated but not all charities are equal in this deal. Something like the Red Cross? You’re allowed 60% of your income. Something like a Police or Veteran society? I think that’s a 30% cap of your income. The specific 20-30-50-60 is complicated and not something “obvious” you’d need to look up the charity’s “type” from their paperwork and then find that type in a list. Obviously almost nobody comes to donating this much to a charity, but still, thems the rules and I don’t make ’em.
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