Tax bracket and charitable donations

Question

I think I am on the border of two tax brackets. I have heard that, in some cases, you can lower your tax burden and shift into a lower tax bracket if you donate sufficiently to charity. Is there an easy way to calculate that possibility?

Thanks,

Valeria

CoryF · Accepted Answer

This is a great question, Valeria.

Charitable deductions are part of your itemized deductions placed after your Adjusted Gross Income (AGI) on the tax return. This means if your itemized deductions (including charitable spending) exceed your standard deduction, it can lower the AGI to your Taxable income. This can result in a lower tax bracket according to your filing status.

This effort can be difficult to predict, unless you know what your income will be at the end of the year. You can consult this source for your current tax brackets for 2023. You can rely on this 2023 source for your standard deduction and the threshold for when your charitable spending (itemized deductions) is effective in reducing your AGI to a lower tax bracket.

Remember also, that itemized deductions include mortgage interest and state taxes paid and this can help you as you contemplate donating to a charitable organization at the end of 2023. You will want to get a receipt or evidence that a donation was made to keep with your tax records.

CoryF · Accepted Answer

That is a great follow up question, Valeria.

I don't want to discourage you from a donation to charity. However, in the case of using the Standard Deduction, there is no tax benefit for your small amount of charitable donations.