Taxes advise | Imamother

amother

Scarlet

Wed, Nov 29 2017, 11:16 am

Hi, I went to an accounted today because my income is over the bracket and I asked him if I can donate an amount to charity ( rather then to pay the IRS I might as well give it to tzedukah) and if it's going to be calculated as a deductable he said no. It's too late for this year. Anyone heard of such a thing that charity doesn't get included in your tax deductible?

Cookiegirl

Wed, Nov 29 2017, 11:20 am

As of now, charitable contributions are still deductible for tax purposes (subject to certain limits) if you are itemizing deductions, however, you may be in a position where the standard deduction exceeds your itemized deductions (even with some charity). In that case, donating to charity may not change your tax situation, unless you donate quite a lot...

leah233

Wed, Nov 29 2017, 11:22 am

Are you still working on you 2016 taxes? If so it is too late to take a deduction now.

If you are tax planning for 2017 did you already give over 50% of income limit (30% for private foundations)and or are you sure you are itemizing?

amother

Scarlet

Wed, Nov 29 2017, 11:27 am

Thank you for your quick response. I didn't give any donations yet only a few hundred dollars and he didn't take in charity at all as he said that no charitable contributions would make a difference.
What does itemized mean?

groovy1224

Wed, Nov 29 2017, 11:32 am

amother wrote:

You can choose to take a standard deduction or itemize. Your accountant will advise you to do whatever will yield you the most savings. If you are taking the standard deduction, you will not get any tax benefit from donations.

Cookiegirl

Wed, Nov 29 2017, 11:35 am

For 2017, if you are married and filing a joint return with your husband, the IRS allows you to have a "standard deduction" of $12,700 to reduce your taxable income. Itemizing comes in when you have more than $12,700 of certain tax deductible expenses, including state and local income taxes, real estate taxes, mortgage interest, charity, large medical expenses and others. If you spend money in these categories and they add up to more than $12,700, then you would itemize your deductions because you would further reduce your taxable income. It sounds like you don't have enough of these other types of expenses to add up to the point where giving additional charity would give you an additional deduction.

Note: If you are not filing a joint tax return, the standard deduction will be different, but the concept would be the same...you need to spend enough money on tax deductible categories to itemize, and then each additional dollar you give to charity would reduce your taxable income.

Hope this helps.

Orchid

Wed, Nov 29 2017, 11:41 am

I'd also like to point out that you don't get a dollar for dollar reduction of taxes for your charitable donations.

Meaning, you're saying if you owe $500 to tax, may as well give $500 to tzedakah. That's not the way it works.
If your tax rate is 10% (simplified for just this example), then your $500 donation to tzeddakah reduces your tax bill by $500 X 10%, or $50. So if you pay 10% tax rate, a $500 tzeddakah donation reduces your taxes by $50, not the full $500.

And I don't understand why it would be "too late" to donate for 2017 as it is still within 2017. Perhaps ask for clarification on this point. Now it could not be the charitable deduction will not be "worth it" as your standard deduction exceeds your itemization anyway, as others have mentioned, but your accountant didn't say it wasn't worth it, but that it was "too late." That doesn't really make sense.

amother

Scarlet

Wed, Nov 29 2017, 12:26 pm

Cookiegirl wrote:

Thank you everyone, cookiegirl, I don't have a mortgage and medical expense.

amother

Scarlet

Wed, Nov 29 2017, 4:20 pm

Shoshana37 wrote:

You can set up an IRA account put money aside for retirement if you have not done that already

Can you please explain? Meaning that the money that I put away won't be calculated at earned money?

Cookiegirl

Wed, Nov 29 2017, 4:41 pm

Yes, an IRA (Individual Retirement Account) is a way to put money aside now and it will reduce your taxable income this year. This is called a pre-tax contribution. (As Orchid notes above, it doesn't decrease your taxes dollar for dollar, but it will reduce the amount of money that you are paying tax on this year). If you invest well, your IRA account can grow. When you take money out (there are many rules about when you can take out the money as this is a savings vehicle for retirement) you will pay tax on it at that point.

You can also consider a Roth IRA which is another kind of IRA. That type of account doesn't help you reduce your taxable income now, but the money, including any investment gains, are tax free when you withdraw them (also many rules about when you can take out the money).

The above is a very broad description of these types of accounts. You should discuss these options with your accountant if you have some money that you can afford to put away (assuming so, since you were considering giving some away to charity).