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pldiggs
Returning Member

Deductions exceed taxes

I am retired. My deductions for 2022 will possibly exceed fed and state taxed amount. Due to large mortgage interest and planned large charitable giving.  What is the outcome if that happens? Is there a carry-over for 2023?

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5 Replies

Deductions exceed taxes

You may have a charitable contribution carryover into 2023. The amount you can deduct for charitable contributions is generally limited to no more than 60% of your adjusted gross income (AGI).

 

You can carry over any contributions you can't deduct in the current year because they exceed the limits based on your adjusted gross income (AGI). Except for qualified conservation contributions, you may be able to deduct the excess in each of the next five years until it is used up, but not beyond that time.

 

A carryover of a qualified conservation contribution can be carried forward for 15 years.

 

See Carryovers

pldiggs
Returning Member

Deductions exceed taxes

This is not only about charity as previously stated.

To be more specific, for example:

IRS Taxes accessed for 2022 is $16,000. 

Mortgage interest paid  2022 $18,000.

Mortgage taxes paid $7,000.

Planned Charity cash to church $10,000.

My deductions all around will exceed taxes owed amount for year 2022.

What will happen to excess mortgage interest and taxes paid in addition to charitable giving? Will I get carryover tax credit on 2023 and what can be done, if anything to mitigate this?

Deductions exceed taxes

@pldiggs 

 

You are confusing itemized deductions that can reduce your taxable income  and the federal income tax on that taxable income.   Itemized deduction cannot reduce your tax bill only your taxable income.   So what will your taxable income be ?  

pldiggs
Returning Member

Deductions exceed taxes

Taking into account itemized deduction, I speculate around $60,000. will be my taxable income. The state taxes to be paid on home and other real properties will reach about $8,000. I am 74 and retired on pension. I also pay Maryland state taxes on retirement pension. What happens is with itemized deductions and planned charity, it exceeds the amount of taxes irs may accesses and I paid into it? That would possibly put me in a negative tax situation. What then happens?

Deductions exceed taxes

As tax guru @Critter-3 said, it sounds like you are confusing taxable income and tax liability.

 

Taxable income is the amount AFTER deductions. So if you have $60,000 of income after subtracting your mortgage interest, property taxes and charitable contributions, then you will pay federal tax on $60,000.

 

If $60,000 is your income, then:

$60,000 – ($18,000 mortgage interest - $7,000 property taxes - $11,000 charitable contributions) = $24,000 in taxable income. The federal tax on that amount is about $2,675.

 

You can’t deduct federal taxes paid on either your federal or Maryland return.

 

If the $16,000 of IRS taxes assessed for 2022 means the amount of federal tax withheld from your pension, then you will get the difference back as a refund ($16,000 - $2,675 = $13,325).

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