– It’s important to note – money you give to charity cannot be directly subtracted from the taxes you owe.  It doesn’t work that way.  Charitable giving is a “deduction,” meaning that you can deduct the amount you give to charity from your taxable income.  By reducing your taxable income, you reduce the amount of taxes you owe, but not on a one-to-one basis.

– Let’s see how that works.  If I gave $5000 to charity, I would be able to reduce my annual income by that amount, and I don’t have to pay taxes on that $5000.  If I were in a 20% tax bracket, I would save $1000 on taxes from that $5000 gift.

– Tax credits are what allow you to directly subtract sums of money from the taxes you owe.  Currently, there are tax credits available for having dependent children at home, college tuition, energy-efficiency upgrades to your home, earned income (for low-income homes) and adoption, among others.  Following the mortgage crisis, there was a tax credit for first-time homebuyers.