Donating To Charity To Reduce Your Tax Bill
I always have a small tax bill at the end of the financial year for some reason and I would rather donate a chunk of it to charity. But how much of a $5000 tax bill can be reduced in this way?
Mary, New Farm, Qld
This is a very generous decision and one that will lower your tax bill, but it won’t wipe it out. Many people believe that making a charitable donation reduces your tax, dollar for dollar, but that is a misunderstanding. The tax benefit is proportional, and the exact proportion depends on your marginal tax rate.
Please seek advice from a tax accountant for more specific information about your personal situation, but the table below will give you an indication of the benefit you can expect depending on your marginal tax rate (including the Medicare levy).
By Kate McCallum, financial adviser and author of The Joy of Money; multiforte.com.au
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