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This is a bit specific for my situation but I thought giving some context could clarify what I'm trying to achieve.

I live in the United States. I've always dreamt of funding my own non-profit (501c3) and solving issues that I'm passionate about but up until recently, I haven't had the income to be able to support that.

I've been very fortunate over the past few years and now I have the following sources of income coming in:

  • I have a full-time job as a W-2 employee where my annual salary comes out to a little more than $320,000.
  • I have my own side business (an LLC) that's expected to yield $120,000 to $150,000 in revenue this year.
  • I have short term realized gains from stocks that have returned $80,000 for the current year so far.

If I set up my own non-profit (501c3) entity, is it possible for me to donate any or all of my sources of income to offset my tax burden for this year, and if so what percent of each of my sources of income am I allowed to contribute to it annually to offset my tax burden?

Specifically, what ways are there, if any, to offset the tax burden on my W-2 income?

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  • Operating a 501c3 within the rules is not trivial, especially if what you are 'passionate about' isn't the same as what's written in the law and regulations. If an existing organization (or combination of several) comes even close to what you want, you might talk to them about setting up a 'donor-advised fund'; this allows you to direct within limits where and when the money is used, but they handle the checking and reporting required for compliance. Mar 21 at 3:39
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If I set up my own non-profit (501c3) entity, is it possible for me to donate any or all of my sources of income to offset my tax burden for this year, and if so what percent of each of my sources of income am I allowed to contribute to it annually to offset my tax burden?

You and your LLC are different entities from the 501(c)(3) entity that you propose to create, and what either of you can donate (whether tom your "own" charity or to other charities) is still subject to the rules regarding what you can donate to charity and deduct on Schedule A. The IRS says

In most cases, the amount of charitable cash contributions taxpayers can deduct on Schedule A as an itemized deduction is limited to a percentage (usually 60 percent) of the taxpayer’s adjusted gross income (AGI). Qualified contributions are not subject to this limitation. Individuals may deduct qualified contributions of up to 100 percent of their adjusted gross income. A corporation may deduct qualified contributions of up to 25 percent of its taxable income. Contributions that exceed that amount can carry over to the next tax year.

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  • Note 'qualified contributions' described in the current (TY2020) Schedule A and pub 526 had to be made during 2020, and are not applicable in 2021 or later. Although there are about 280 days left during which Congress might change this. (And to be clear, qualified contribution is separate and different from whether the donee organization is qualified -- that has long been, and remains, required for deduction.) Mar 21 at 3:32

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