Question about donations

Hello, I have a couple of questions that I wanted to verify. I live in the US (TN) and was wondering if donations made to me from my website are not taxed correct? Also, when I make a donation of my own, they say that is tax deductible. So does that mean if I owe $10,000 for tax for example, and make a $5000 donation to something, does that mean my tax will be brought down a lot more from $10,000?

 

It depends on if it is a tax credit or not...sounds like you need a tax person...that is always the safest thing to do. donations are different than tax credits....tax credits are taken off the bottom line, donations are factored in. Also, I think unless you are non-for-profit any donations may be seen as income...

 

Man it seems that noone understands the basics of taxes I just don't want to keep bothering my accountants with a million questions.

 

Tax credit - A tax credit reduces your taxes directly.
If you earn $1000 at a 10% tax rate, you owe $100 in
taxes. A $100 tax credit would reduce your taxes by
$100.

Tax deduction - A tax deduction reduces your taxable
income. In the example above, a $100 tax deduction
would reduce your taxable earnings by $100; but would
reduce your taxes by only $10. (you would be taxed 10% on $900)

 

Thanks, I am not sure I understand the tax deduction explaination entirely.

 

Basically, a Tax Credit is much more Valuable then a Tax Deduction.

Say you make
$10,000

TAX CREDIT OF $1000
or
TAX DEDUCTION OF $1000

Tax rate of 10%
...........

With the tax credit, you calculate your taxes, in this case 10% of $10,000 or $1,000. You then apply your $1,000 tax credit and would owe $0 in taxes.
(the tax credit effectively saved you $1,000)


With the tax deduction, you deduct $1,000 from the amount you made, and then calculate your taxes after the deduction. So $10,000 - $1,000, is $9,000. You take 10% of $9,000 and you owe $900 in taxes.
(the tax deduction effectively saved you $100)

Usually the value of a tax deduction is calculated by multiplying it times your tax rate. So if you are paying %28 in taxes, a $1,000 deduction is worth $280 in real savings to you.

Hope that help some.

 

Thanks brown So a the phrase "tax writeoff" is considered a deduction correct? What qualifies as a tax credit? I never heard that term used before.

 

Tax writeoff usually means a deduction, like a business expense (telephone, office supplies, web hosting, etc.)

Tax credits are things like the child tax credit, where you get a credit for each child you have under your care...
http://en.wikipedia.org/wiki/Tax_credit
http://en.wikipedia.org/wiki/Child_tax_credit

 

Time to make babies