If I donate part of a grand prize to charity, will the tax write-off cover the rest of the items won?

Question

Recently I won a $15,000 home kitchen package, though will be unable to afford the taxes the prize will accumulate. One part of the prize alone totals $10,000. If I donated that item to a charity or non-profit, would that write-off be enough to cover the taxes on the rest of the items?

Answer 1

The donation would be non-cash charitable contribution which would be reported on Schedule A - Itemized Deductions. Since the amount you indicated would be over $500, you would need to fill out form 8283 - Noncash Charitable Contributions, and since it's over $5,000 you'd also need to obtain a qualified appraisal of the property and attach that to the return as well. The other thing is that the most that you can deduct with charitable contributions is 50% of your AGI, and the rest would be carried forward for up to 5 years. So depending on your other income, you might or might not have enough in write-offs to get out of the taxes on it. And you've got to hope that the appraisal on the part of the prize that you donate would be the $10,000 that you are saying that it is worth.

And, of course you've got to itemize to get any benefit from your donation.

Answer 2

No. You will have to report the entire $15,000 as taxable income and will be able to deduct the $10,000 that you donate. Therefore, your taxable income minus your deduction will be $5000 and you will have to pay tax on $5000 more than if you did not win.

You could sell that item, donate part of the money to charity, and use the remainder to pay the tax on $15,000 minus the amount of the donation. For example, if your total (state and federal) marginal tax bracket is 20%, then you would donate and deduct $8750, and use the remaining $1250 to pay tax on $6250.

You could also donate the entire grand prize to charity and deduct the entire $15,000. This is the only way to pay no tax; if you keep anything, you must pay tax on the value of what you do not donate. The only option is if you donate appreciated securities. If you received securities that are now worth more than they were then, the amount to include in taxable income is their value when you won them, but the amount to deduct is their value when you donate them.

Answer 3

1. The taxes on the kitchen package depends upon your highest income bracket. If your highest income bracket is more than the percentage tax held from the winning, you may have to pay more from tax from your pocket. If your highest income bracket is low, you may get a refund.

2. Home kitchen package is for $15,000. If you search around, you may get similar or same package for much less cost. In that case, it may not be a good idea to even accept the gift. (It is always best to search at the Internet.)

3. Do you need the kitchen package? If you don't immediately need the kitchen package, you are wasting your money. May times it may not be even right idea to try to win some thing unless it is only and only in cash.

So decide what is best for you?

Answer 4

Throw your stuff in a bag and bypass to the closest Goodwill drop off station. once you supply them your stuff, ask for a receipt. you will get a crimson slip for you to fill out, the place you ought to VERY oftentimes checklist APPROXIMATE fee (present day situation). keep the receipt on your 2008 taxes in case you ought to coach which you fairly made the donation (no longer likely). in case you record an EZ 1040, then you do no longer choose a receipt as long because of the fact the dollar fee would not exceed $2 hundred (i've got self assurance - or something like that). yet something over that, think approximately to itemize the deduction/write-off on a time table C. Take this with a grain of salt because of the fact i myself do no longer know the thank you to do tax stuff - yet i know deductions and write-offs are area of the time table C. do no longer bypass loopy on the dollar fee of your products- that could deliver some crimson flags to the IRS. in many cases, if I supply a super rubbish bag of clothing, I say that is nicely worth $one hundred fifty. The write off isn't extensive, by all means, yet each each now and then merely having the ability to offload your stuff someplace and get slightly tax wreck from the gov't is a lot much less stressful than sitting on your driveway all day haggling with people who desire to purchase your clothing for 25 cents at your storage sale. i do no longer know the place you reside, yet there is likewise pink heart and Salvation military, additionally St. Vincent De Pauls - seem them up interior the yellow pages - they actually come on your abode and p.c.. it up for you, and supply you with a receipt, besides.

Answer 5

No, you'd add the whole $15,000 to your income, then at best subtract the $10,000 donation, so you'd still be paying taxes on the other $5000 that you kept, you just wouldn't have to pay tax on the amount you donated.

Answer 6

A write-off lowers the amount of your taxable income by the amount of the write-off.