Is it possible to donate enough to charity to avoid paying federal taxes altogether and if so, how much?

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sarahrgibbons

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Is it possible to donate enough to charity to avoid paying federal taxes altogether and if so, how much?

SteamTrainAnswer

Level 15

@sarahrgibbons

For a working person, it would be very difficult to do so...and just the Charity contributions themselves would not be enough, since what can currently be deducted from income, for making charity deductions, is limited to 60% of AGI (to so-called 50% charities....yeah, the 50/60 terminology can be confusing).....so one would have to have other "itemized" deductions to cover the other 40% of their AGI. All this assumes one has enough total itemized deductions such that the Std Deduction isn't greater.

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(Of course....If your income so low in the first place...such that the Std Ded wipes out your AGI, then no charity donations are needed at all)

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For a Retired person, might be difficult too. Certainly, if (big IF), if a retired person (age 73 or older for 2023) has most of their income coming from actual traditional IRAs...they could direct most of their RMD as a QCD (direct transfer from the IRA to a qualified charity...subject to a $100k maximum). Thus eliminating most of their income, leaving (perhaps) their Std Deduction to wipe out what's left of their other income....assuming other income is so low that SS isn't getting taxed.

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But specific details as to income, and filing status (MFJ, MFS, Single etc) would be required to even hazard a guess as to how it "might" be possible for any person, or couple.....or if it might be impossible for certain tax situations.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

SteamTrainAnswer

Level 15

@sarahrgibbons

For a working person, it would be very difficult to do so...and just the Charity contributions themselves would not be enough, since what can currently be deducted from income, for making charity deductions, is limited to 60% of AGI (to so-called 50% charities....yeah, the 50/60 terminology can be confusing).....so one would have to have other "itemized" deductions to cover the other 40% of their AGI. All this assumes one has enough total itemized deductions such that the Std Deduction isn't greater.

______

(Of course....If your income so low in the first place...such that the Std Ded wipes out your AGI, then no charity donations are needed at all)

______

For a Retired person, might be difficult too. Certainly, if (big IF), if a retired person (age 73 or older for 2023) has most of their income coming from actual traditional IRAs...they could direct most of their RMD as a QCD (direct transfer from the IRA to a qualified charity...subject to a $100k maximum). Thus eliminating most of their income, leaving (perhaps) their Std Deduction to wipe out what's left of their other income....assuming other income is so low that SS isn't getting taxed.

____

But specific details as to income, and filing status (MFJ, MFS, Single etc) would be required to even hazard a guess as to how it "might" be possible for any person, or couple.....or if it might be impossible for certain tax situations.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

SteamTrain

Level 15

During some past national disasters, Congress passed legislation to allow up-to 100% of AGI to be deducted for Charity donations, thus wiping out taxable income...but that is no longer in effect. We can't know if that will change in the coming year, or years for future "situations" or if Congress decides to change the % of AGI allowed for charity deductions.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

Mike9241

Level 15

there is a situation where this might be possible. you have an IRA and can make a QCD (Qualified Charitable Distribution). the maximum QCD is $100,000 which reduces the taxable portion of the IRA $ for $ (not below zero). your other income, including any part of the IRA distribution that can't be excluded from taxable income, does not exceed your standard or itemized deductions whichever you choose. warning while this can work certain items of income/ deductions can trigger the alternative minimum tax.

Mike9241