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Impact of charitable donations on taxable income

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George and Margaret Wealthy are in the 48 percent tax bracket, considering both federal and state personal taxes. Norman Briggs, the CEO of Community General Hospital, has been aggressively pursuing the couple to contribute $500,000 to the hospital's soon to be built Cancer Care Center. Without the contribution, the Wealthy's taxable income for 2008 would be $2 million. What impact would the contribution have on the wealthy's 2008 tax bill?

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The expert computes the impact of charitable donations on taxable income. A reference is provided.

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Assuming that the Community General Hospital is a organization which meets the Federal government's requirements for eligibility, then based on 26 US Code § 170 which governs Charitable, etc., contributions and gifts, charitable donations are allowable subject to limitations.

For the Wealthy couple, the allowable deduction is computed as follows:
Limit = 50% of taxable income = 50% x $2 million = $1 million => which makes the $500,000 allowable to its full ...

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