Donating and Tax Breaks

August 4th, 2013
ea, taxes
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:

Jealousy In Polyamory Isn't A Big Problem And I'm Tired Of Being Gaslit By Big Self-Help

The nuance is in the post, guys

via Thing of Things July 18, 2024

Trust as a bottleneck to growing teams quickly

non-trust is reasonable • trust lets collaboration scale • symptoms of trust deficit • how to proactively build trust

via benkuhn.net July 13, 2024

Coaching kids as they learn to climb

Helping kids learn to climb things that are at the edge of their ability The post Coaching kids as they learn to climb appeared first on Otherwise.

via Otherwise July 10, 2024

more     (via openring)