Hypothetically, let’s say that I hit the Überpowerball, take the one time pay out and after taxes I get $110 million. Out of that I use a portion to pay off my debts, buy a house, get a car, a few other odds and ends, leaving me with $100 million. I then find God (“Hey! He was in the couch all the time!”), and decide to donate the $100 million to the church as thanks for my good fortune. How much of that $100 million would a get to claim and what kind of tax refund (if any) could I expect to recieve? (Assume that I squirreled away $9 million of the $10 million I didn’t give to the church, in investments.)
Under the circumstances you described, you’d get nothing – although I’m sure the church you donated to would probably name something after you.
Charitable donations are an itemized deduction. These deductions are used to lower your taxable income. If you say won the powerball in '02 and then in '03 had no income but made your $100 million donation… well, there would be no tax effect. You can not use deductions to lower your taxable income below zero. Best case, you lower your taxable income to $0 and pay no taxes. But see below for the catch…
If you had your $9 or $10 million invested and made a decent return on your money, say 8%, so you had taxable income of $800,000, then you would be able to offset that income with the value of your donation… so you are thinking, “hey, I’m off with no tax burden. Even better, I could just donate $800,000 a year over time to avoid paying any taxes for quite a while”. But then the AMT (alternative minimum tax) would kick in, which is basically a parallel system of tax rules which exists basically to prevent these sort of things.
Overall, as your unofficial financial advisor, I’d recommend you just give the money to me.
Thinking about all this reminds me why I got out of the whole accounting biz in the first place…