Welcome to April - USA folks please commence the tax talk.
April 5, 2010 3:16 PM Subscribe
How much do donations reduce your taxes? (USA)
I know that donating reduces your taxes, but I'm not sure how to calculate it. If I donate $1,000, how much of a tax offset will I receive? How about charitable mileage? Is that X cents per mile treated as a cash donation? What about the donation of goods or services?
Is there a spot where I can look up my income or adjusted income and see what the value of a donation is? Not that it would change our charitable giving, but I'm curious.
Standard Disclaimer: You're not a CPA or my CPA or tax preparer or anything like that.
I know that donating reduces your taxes, but I'm not sure how to calculate it. If I donate $1,000, how much of a tax offset will I receive? How about charitable mileage? Is that X cents per mile treated as a cash donation? What about the donation of goods or services?
Is there a spot where I can look up my income or adjusted income and see what the value of a donation is? Not that it would change our charitable giving, but I'm curious.
Standard Disclaimer: You're not a CPA or my CPA or tax preparer or anything like that.
Best answer: The IRS website is suprisingly useful. Their help line is also said to be uncharacteristically helpful. See Publication 526 for the complete list of rules.
In general, your tax break from a charitable contribution is ($ given) * (1 - marginal tax rate). The magic search term is "tax schedule" - in 2010, for example, single earners making between $34k and $82.4k have a marginal tax rate of 25%.
As bendy said, this is all assuming you itemize rather than take the standard deduction - if your total deductions don't exceed the standard deduction, there's essentially no tax break.
posted by 0xFCAF at 3:24 PM on April 5, 2010 [2 favorites]
In general, your tax break from a charitable contribution is ($ given) * (1 - marginal tax rate). The magic search term is "tax schedule" - in 2010, for example, single earners making between $34k and $82.4k have a marginal tax rate of 25%.
As bendy said, this is all assuming you itemize rather than take the standard deduction - if your total deductions don't exceed the standard deduction, there's essentially no tax break.
posted by 0xFCAF at 3:24 PM on April 5, 2010 [2 favorites]
Best answer: Miles driven for charitable work are figured at 14 cents per mile and added to your total contributions. Goods and services are deducted at their fair market value.
posted by bendy at 3:27 PM on April 5, 2010
posted by bendy at 3:27 PM on April 5, 2010
Best answer: Formula above is completely wrong, that should be: ($ given) * (marginal tax rate). What I had was the complement "true" cost of giving some amount.
posted by 0xFCAF at 3:27 PM on April 5, 2010
posted by 0xFCAF at 3:27 PM on April 5, 2010
Best answer: Services are not deductible at their fair market rate. You may only deduct the out-of-pocket costs involved in performing a service.
posted by 0xFCAF at 3:30 PM on April 5, 2010
posted by 0xFCAF at 3:30 PM on April 5, 2010
Best answer: Yeah, this is pretty simple.
If you're already itemizing you, donating $1000 saves you $1000 times your marginal tax rate. For most middle-class people that would mean $250.
If you're not itemizing -- most commonly if you rent -- then donating $1000 saves you $0 in taxes.
About the only time you can donate and get a tax break without itemizing is if your employer has a plan so that you can donate with pretax dollars. Then you can donate $100 but it costs you $75 in takehome pay and Uncle Sam $25 in foregone taxes (if you're in the 25% bracket).
posted by ROU_Xenophobe at 3:36 PM on April 5, 2010
If you're already itemizing you, donating $1000 saves you $1000 times your marginal tax rate. For most middle-class people that would mean $250.
If you're not itemizing -- most commonly if you rent -- then donating $1000 saves you $0 in taxes.
About the only time you can donate and get a tax break without itemizing is if your employer has a plan so that you can donate with pretax dollars. Then you can donate $100 but it costs you $75 in takehome pay and Uncle Sam $25 in foregone taxes (if you're in the 25% bracket).
posted by ROU_Xenophobe at 3:36 PM on April 5, 2010
Best answer: Under AMT the amount that it's deducted is reduced. Unless you make an awful lot of money it's not reduced by much.
posted by jewzilla at 5:55 PM on April 5, 2010
posted by jewzilla at 5:55 PM on April 5, 2010
Response by poster: Thanks! I get it. Best answer all around.
posted by 26.2 at 9:54 PM on April 5, 2010
posted by 26.2 at 9:54 PM on April 5, 2010
This thread is closed to new comments.
The IRS allows you to either take a standard deduction ($5700 if you file single, $11,400 if you're married filing jointly) or itemize your deductions. Itemizing allows you to deduct things like mortgage interest, property taxes, medical expenses and charitable contributions. It only makes sense to itemize your deductions if they add up to more than your standard deduction.
I am a tax preparer but I am not your tax preparer.
posted by bendy at 3:24 PM on April 5, 2010 [1 favorite]