I you were to say, make $100,000 in the stock market in a year, I would have to pay 27% on it in my tax bracket. Can I just give the amount I have to pay in taxes to a church or charity organization and not have to give any of it to the government, or is the amount i give to charity just tax deductible? I'm not too sure about this, but i'd rather give my money to charities than to this government so I know where my money is actually going.
2007-06-23 09:35:09 · 7 answers · asked by tatereatinmic 3 in Business & Finance ➔ Taxes ➔ United States
If you give the entire $100K to charity you would not have to pay taxes on it. If you want to give the charity $27K, you would pay taxes on $73K.
The rest of my answer asks you to distinguish between investment income and capital gains. Investment income would be dividend income for example. This is taxed as regular income, but as long as it is passive income it is not subject to social security taxes.
If you sell your stock and keep part of the proceeds, this falls into the capital gains area. If this brings your total taxable income to any number less than $100K, you will pay only a 5% capital gains tax on the capital gains income. If your total taxable exceeds $100K, the capital gains tax jumps to 15%. It does not go higher no matter how much you make.
If you are already in the 27% bracket, you are likely looking at a 15% tax on capital gains if they go into the range you are talking about -- BUT, since you appear not to need the money you can reinvest in other stock via a 1031 exchange. There are very specific rules for this, but basically you never touch the money you don't want taxed. It goes from your hands to that of a qualified intermediary (there are companies that do nothing but this). You then have 45 days to identify what you intend to buy and six months to close the deal to protect that money from immediate taxation. You tell the qualified intermediary what to buy and they make the purchase in your name. You pay taxes when you finally quit rolling the investments over and actually take possession of the money.
2007-06-23 19:31:57 · answer #1 · answered by Poetic 3 · 0⤊ 1⤋
First of all, capital gains on the sale of stock are taxed at a maximum rate of 15% if they're long term. If they're short term though, they'd be taxed at your normal rate.
You can give appreciated stocks to a charity and take a full deduction for them. Since the charity doesn't pay income taxes, the gains on the stocks will escape taxation that way. If you sell the stock and give some of the money to charity, you would only get a deduction for the amount you donate.
2007-06-23 17:43:50 · answer #2 · answered by Judy 7 · 0⤊ 1⤋
Capital gains held for less than 1 year are taxed at the same rate as normal income. So if you make $100,00 and are in the 35% tax bracket you would have to pay roughly $35,000 in federal income tax on your capital gains.
As for giving to charity, the amount you give to a qualified charity is deducted from your earnings that were taxed, not on the amount of tax. In the above example, if you gave $10,000 to charity, you would be taxed on $90,000. Make sense?
Talk with your accountant if you want to lessen the tax impact of capital gains. There are numerous ways to reduce your tax liability on capital gains; all of which are perfectly legal.
2007-06-23 16:55:21 · answer #3 · answered by CogWork 2 · 1⤊ 1⤋
If the stock is held for at least 6 months, you pay Capital Gains Tax not Income Tax on your profits. Capital Gains Tax is much less than Income Tax. When you give to a charity, you still don't know where the money is going.
2007-06-23 16:48:54 · answer #4 · answered by liberty11235 6 · 0⤊ 2⤋
It's just a tax deduction. You'd have to give the entire amount to charity to avoid tax completely. And since charitable deductions are limited to 50% of your Adjusted Gross Income, you'd have to have at least $200,000 in AGI to take the deduction on the entire amount. Any amount above the 50% limit can be carried forward to future years, again subject to that year's 50% limitation.
2007-06-23 16:57:10 · answer #5 · answered by Bostonian In MO 7 · 1⤊ 1⤋
If you gave the amount you had to pay in taxes to charity, you would reduce your income by the amount of your contribution (assuming you itemized your deductions), but you will not reduce your taxes by the amount of your contribution.
A lot of people think that charitable donations reduce your tax dollar for dollar, which is not true.
If you want to give to charity and have stock that has appreciated in value, it would be better for you, tax-wise, to give the appreciated stock to the charity. If you have held the stock for more than one year, you can take the appreciated value of the stock as a charitable donation. This is more valuable to you than selling the stock and donating the proceeds, since you will pay tax when you sell the stock.
2007-06-23 17:47:15 · answer #6 · answered by ninasgramma 7 · 0⤊ 1⤋
Then you are either lying to us, or stupid, or both!
Why not just give your entire salary to charity rather than "giving it to this government"?
If you make $100,000 capital gain, and your accountant is too dumb to let you distribute it whatever way you choose, then one of you is a complete idiot!
You deserve each other!
(The vast majority of those with $100,000 to give to charity pay little to NO income/capital gains taxes....)
2007-06-23 16:45:55 · answer #7 · answered by Anonymous · 1⤊ 4⤋