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Say, for example, I make $300,000 in ordinary income this year and $300,000 in capital gains.

If I donate $10,000 from my cash accounts to charity, does the deduction get applied to my ordinary income tax rate or my capital gains income tax rate first?

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    Did you donate $10k in cash or appreciated stock? Oct 10, 2015 at 16:25
  • Sneaky question, Joe. I thought this was a no-brainer to answer, now I see where this is going.
    – Rocky
    Oct 10, 2015 at 16:29
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    I donated cash (hypothetically!)
    – Jeremy T
    Oct 10, 2015 at 16:29

1 Answer 1

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Charitable deductions (and all Schedule A deductions) are applied to your marginal tax calculation. They reduce the taxable income on the line 43 of your tax return (form 1040). When you calculate your tax on the capital gains tax worksheet, you start with that number. You then deduct all the capital gains from it and calculate the ordinary tax on line 24 of the worksheet.

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