Taking Advantage of the Filing Process for the Benefit of Yourself and Others - Charitable Contributions

For those of you who may feel a moral responsibility to pay taxes, you can potentially reduce your tax liability and save money while also preserving your conscience in the process. This can be achieved through the exercise of a charitable deduction under §170 of the Internal Revenue Code.

In order to understand this concept, it must first be explained how income taxes are assessed. First, you calculate your gross income for the year, which is very broadly defined under §61(a) as "all income" from whatever source derived. A non-exhaustive list of examples is included for illustrative purposes. Sections 71 through 91 include additional examples of income and sections 101-139 and 911 include specific examples of items excluded from gross income. Following the application of these sections, the taxpayer has calculated his or her gross income.

From here it is necessary to calculate your taxable income because this is the amount that is actually taxed. The taxpayer has a choice when calculating this amount. They can either reduce gross income by the standard deduction or by itemized deductions. The standard deduction is equal to an amount indicated in IRC § 63(a), $12,200 for single filers in 2019. Itemized deductions are listed in IRC § 63(a). These itemized deductions include expenses incurred for charitable contributions made.

It follows that socially conscious taxpayers can both give back and save themselves money that would otherwise be distributed to the IRS. This will keep taxpayers in a better financial position while numbing any perceived guilt over their failure to pay their fair share. However, it must be noted that in order to realize this benefit, the taxpayer's itemized deductions (including charitable contribution expenses) must exceed the standardized deduction. Otherwise, the taxpayer will lose both the money donated to charity and that excessively taxed.