• Posts
  • RSS
  • ◂◂RSS
  • Contact

  • Donating and Tax Breaks

    August 4th, 2013
    giving, taxes  [html]
    People often put down others as donating "for a tax break". Sure they look generous, but they really just want to save money. But that's not how it works.

    In the US you can report money you donated, and for tax purposes that money is treated as if you hadn't earned it. While this does decrease the amount you pay the government, you don't come out ahead financially compared to not donating.

    Let's look at an example. The median family pays taxes at a marginal rate of 15%. That means that if their income were to go up by $1K, federal taxes would go up by $150. If instead of keeping that $1K the family donated it [1] they could "deduct" $1K from their federal income. This would decrease their tax bill by $150, putting it back where it was before.

    (This is particularly strange because people focus on their tax break and not the actual effects of their donation. For example, this CNN article writes that "Thousands of Americans who donated to charities last year in the wake of Superstorm Sandy and the school shooting in Newtown, CT. may not get the tax benefits they were expecting" instead of "Thousands of Americans ... were duped into donating to scams." Of course it's bad that these donors ended up spending $X when they thought they were spending 85% of $X, but that shouldn't be the main story.)


    [1] This is only fully true if the family was already itemizing donations. If you don't have anything else you can deduct then you have to donate more than the "standard deduction", about $6K/person, in order to have any tax benefit from donating at all.

    Comment via: google plus, facebook

    Recent posts on blogs I like:

    Collections: Teaching Paradox, Europa Universalis IV, Part II: Red Queens

    This is the second part in a series (I) that examines the historical assumptions behind Paradox Interactive’s grand strategy computer game set in the early modern period, Europa Universalis IV (EU4). Last time, we took a look at how EU4 was a game fundame…

    via A Collection of Unmitigated Pedantry May 7, 2021

    Amtrak’s Continued Ignorance

    There was a congressional hearing about high-speed rail. Henry Miller in comments here took notes – thanks for this, much appreciated! The overall content was lacking; the politicians seemed like they were spinning their wheels, not because they themselve…

    via Pedestrian Observations May 7, 2021

    Books and websites on babies

    Several people I know are expecting a first baby soon, and I wrote up notes for one of them. Might as well share here too: Medical:Scott Alexander’s Biodeterminist’s Guide to Parenting is an interesting read, and some parts are actionable.  If you live in…

    via The whole sky April 14, 2021

    more     (via openring)


  • Posts
  • RSS
  • ◂◂RSS
  • Contact