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Old 12-26-2009, 03:06 PM
 
Location: East Germany in America
13,904 posts, read 12,101,333 times
Reputation: 11943

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Hello,

I'm a business moron. I've never been interested in financial matters, for the most part. I'm clueless about tax laws, not to mention I hate trifling with tax forms. I've always filed 1040-EZ and forgotten about it. I'm going to be asking several questions about taxation and here is the first one:

Let me ask this by hypothetical example. Let's say I earn $25,000 gross income for the year. Normally, that's the figure one starts with on the tax forms at the end of the year. Let's say I donate $13,000 of my earnings to an 'approved' charity. I understand that I would still report $25,000 as my gross, but would that $13,000 in donation effectively take my actual 'taxable earnings' (I made that term up to explain what I mean) down to $12,000 ? So, would the IRS treat my income as $12,000 for the year rather than $25,000 ?

Note: the numbers are just random. I simply want to understand what charitable contribution does to taxable income.
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Old 12-26-2009, 05:34 PM
 
Location: Inland Empire, Calif
2,885 posts, read 5,141,589 times
Reputation: 2792
If you donate to a charitable origazination, the amount is deductd off the top, up to a point. If you declare too much, they would spread the deduction over several years. If you declared almost 50%, as in your example, you would be audited until you died of old age....
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Old 12-26-2009, 06:34 PM
 
Location: Deep in the heart of Texas
1,917 posts, read 6,686,153 times
Reputation: 1971
You will have to file form 1040 and itemize your exemptions. My advice to you is to purchase a turbotax or taxcut software, the cheapest one will do, and plug in different scenarios and it will show you how much you are taxed on, if you get a refund, etc.
I use them all the time. I file a 1040 b/c my husband is self employed and we do tithe 10% of our earnings to our church. I don't know about donating 50% to a charity, that WOULD raise a red flag. Good luck.
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Old 12-26-2009, 10:23 PM
 
Location: East Germany in America
13,904 posts, read 12,101,333 times
Reputation: 11943
Quote:
Originally Posted by CTR36 View Post
You will have to file form 1040 and itemize your exemptions. My advice to you is to purchase a turbotax or taxcut software, the cheapest one will do, and plug in different scenarios and it will show you how much you are taxed on, if you get a refund, etc.
I use them all the time. I file a 1040 b/c my husband is self employed and we do tithe 10% of our earnings to our church. I don't know about donating 50% to a charity, that WOULD raise a red flag. Good luck.
Great idea. I hadn't thought of that. I had only thought of dreadfully and painfully sifting through IRS documents on their website. Thank you!
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