[FairyWings]

Hi, Can anyone tell me just how much a tax deductible donation affects the amount you will owe or be refunded on annual returns? We had to pay around $3,000 last year. I would rather donate that, or at least a large portion of that, to my child's school or other organization. If we donate, how much less would we have to pay (estimated percentage), or does it really have any effect at all?

Thanks for your time and attention!

[ScottGem]

First, I'm not sure if a donation to a school, unless a private school, would qualify as a charitable donation. You would have to check to see if the school qualifies as a 501(c)(9) organization.

Second, charitable donations are deductions on your tax return. A deduction reduces taxable income. Assuming a tax rate of 28% you would have to contribute almost 4 times the amount you want to reduce taxes by.

Its also not clear whether your total tax liability was $3K or whether you had to pay 3K out of pocket.

[FairyWings]

Hi, Thank you for answering!

Yes, the $3,000 was out of pocket. So you think a good "rule of thumb" is on an estimated $3000, a donation of $12,000 is what would be needed to keep from paying the gov.

I was just using the school as an example, we could donate to the church or other organization if the school didn't qualify.

Sounds like we'd come out better just paying the Man! LOL!

Thank yo so much!

[ScottGem]

I was just using a 28% tax rate as an example. What you need to do is figure out your effective tax rate and do the math. The lower your effective tax rate, the more you would have to contribute.

If you had to pay $3K out of pocket, then your withholding is set too low. You might want to decrease the number of exemptions you claim on your W4s. I do not believe in loaning the govt my money interest free, so I try to balance my withholding so I get either a small refund or owe a small payment at tax time. Generally my I wind up with less than $100 either way on my fed return. Sometimes I come up short, other times, I get a small refund.

[AtlantaTaxExpert]

ScottGem's advice is solid.