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I give $500 to my parents and $200 to someone in need each month. Is there a way to deduct that amount on my taxes? I transfer the money using Venmo and $200 using Western Union.

I am in the United States.

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3 Answers 3

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If they are your dependents and don't live in your household you may be able to claim a $500 Other Dependent deduction.

Until 2025, there is a $500 Credit for Other Dependents deduction that replaces a suspended dependent personal exemption. The IRS provides a tool to help determine if the facts of a specific relationship qualifies for this.

To be your dependent, you have to pay more than 50% of their expenses and they cannot earn more than $4300. More information in IRS Pub 503

Dependent defined. A dependent is a person, other than you or your spouse, for whom you could claim an exemption. To be your dependent, a person must be your qualifying child (or your qualifying relative). However, the deductions for personal and dependency exemptions for tax years 2018 through 2025 are suspended, and, therefore, the amount of the deduction is zero. But, in determining whether you may claim a person as a qualifying relative for 2021, the person's gross income must be less than $4,300.

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Only gifts to registered charities are tax-deductible to the giver. Gifts to individuals are not. In fact, they may actually be taxable if you give, say, tens of thousands of dollars (the specific limits are more complex and not germane to the question I think),

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  • It's about 15K/year per p2p gifts exemption threshold. With $500/mo probably not relevant, but not that far fetched either.
    – littleadv
    Jan 28 at 19:24
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    Gift taxes are effectively non-existent in the USA for ordinary people. Above ~$15K per year per giver-recipient pair, there are tracking/reporting requirements. But no tax is due until the total amount gifted (from one giver to one recipient) hits an amount over $11 million. en.wikipedia.org/wiki/Gift_tax_in_the_United_States
    – nobody
    Jan 29 at 16:17
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    @nobody I think your last sentence is wrong or confusing. The $11 million dollar figure is the lifetime exemption for one 'estate'. The $15k number rises to $16k in 2022, so let's use that. Say you have never given more than that to a single person. If you give $50k, you owe no taxes, but you have to report them. $16k can be counted for the yearly person-to-person exemption. The other $34k goes towards your $11 million lifetime exemption (actually $11.58 million for 2020). If you give 3 people $4 million each, then 3 x $3,984,000 goes towards your lifetime exemption. Jan 30 at 0:21
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    That actually exceeds your lifetime exemption, so you need to pay taxes on the overage of $372,000. If you give $50k to the same person the next year, $16k is tax-free due to the yearly exemption, but you owe taxes for the remaining $34k because you are already over your lifetime exemption. Jan 30 at 0:23
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No, regarding your gifts to a "needy" person. It's just not possible to take a tax deduction for a gift directed at a specific person, and IRS regulations go to extremes to assure that.

For reference, it works like this.

3 or more people establish a nonprofit corporation under their state's rules. They write Articles of Incorporation and Bylaws which plainly state their mission is to help people in need.

They create program policies which show they are going to help the needy generally, and not just the founder's brother-in-law LOL.

They file Form 1023 with the IRS, "literally the most complicated tax document in the world", with a check for $850 to seek a charitable status under 501(c)(3) of the tax law.

Then that charity fundraises to the general public (no one donor can be too much of their funding, with some exceptions that are no fun), and does giving to assist that class of people they help.

They file an annual Form 990 informational return, "literally the second most complicated tax form in the world". The 990 makes them swear to dozens of questions about mission and donors, to prove they aren't just helping the founder's brother-in-law.

And then, donations to that 501(c)(3) are accredited as tax deductible.

The rules and the system go to great pains to make sure you don't self-direct who the beneficiaries are.

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  • What is the conclusion? 1) No, it is not possible. 2) Or, there is a (legal) loophole (but with a nearly USD 1000 transaction cost). 3) Or, it is so complicated that no one will notice if you bend the rules (but I didn't say that (not directly, anyway)). 4) Something else? Jan 30 at 0:37
  • @Peter good point, clarified. Jan 30 at 1:12

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