Tax Question (refund, deduction, taxable, purchase)

[ChrisC]

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.

[Nayabone]

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....

[CTR36]

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.

[ChrisC]

Originally Posted by CTR36

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!