Why Can't I Deduct My Charity Contributions?

Why Can’t You Deduct Your Charity Contributions?

Many people do not understand how Itemized Deductions and the Standard Deduction applies to them on their taxes. They constantly hear that charity gifts are deductible and they expect to be able to use it as a tax deduction. In most cases this is not true.

It can only be deducted if you are able to itemize deductions on your income taxes. Itemizing means that items you paid out such as charity, medical and dental expenses, certain taxes that were paid, some insurance premiums, casualty and theft losses, some job and employment expenses and a few others that are partly or fully deductible must equal more than your standard deduction to be of value.

So a normal family who makes regular contributions to their church or other charity more than likely will not be able to deduct the amount they paid. Many people are somewhat mislead by this.

A couple who are married and filing jointly must have itemized deductions of more than $11,000 to be able to use the Itemized deduction status. Many of the deductions are limited to from 2 to 7 percent of your earned income. So it would take a considerable amount to be able to deduct them.

A very low income family will probably owe zero taxes so there will be no tax to decrease. Some credits will only apply as a deduction from the amount of tax that is owed, so if you don’t owe any tax you won’t be able to use the credit. This happens a lot where educational expenses and college tuition are concerned. Some parents automatically think they can deduct tuition but if they don’t owe any tax then there cannot be a decrease in the amount of tax that is owed.

Basically, itemized deductions are only beneficial to those with higher incomes. The lower and middle income bracket families will probably not benefit from itemizing expenses on their income taxes.

Once you know what your itemized deductions will be compare that figure to the standard deduction for your status and use whichever amount is the highest. More than likely the standard deduction will be higher and your taxable income will be less.

Special IRS rules also apply to persons who are married but choose to file separately. If one spouse itemizes deductions then the other spouse must also itemize deductions.

There are rare instances where filing separately will be beneficial but more than likely it would not be advisable. Trust your tax preparer or tax preparation software to make the right choice. If the tax program gives you a choice of checking to see if filing differently would be beneficial then by all means try it. At least you will know rather than wonder if you could have done something different.