Charity & Tax Breaks

[MLEN]

In my country, there is no such thing as a tax break on charitable monetary donations. Once you give it, nothing is given back.

Having said this, can anyone here from the US please explain to me what the tax break on charity entails? And if it means getting back what you gave, please share if you think it is moral to take advantage of such a break on money that was meant to be for charity?

 

[b&wpac4]

Having said this, can anyone here from the US please explain to me what the tax break on charity entails? And if it means getting back what you gave, please share if you think it is moral to take advantage of such a break on money that was meant to be for charity?

You don't exactly get the money back. We'd have to get into an in-depth discussion of US tax code to get the exact way it works, but basically we pay a tax on all of our income based on the amount we make. Certain charitable donations are allowed to be listed as deductions (up to a certain amount, if I'm not mistaken) to drive down how much you owe in taxes. This may mean you get a bigger refund, but it may also just mean you pay less taxes.

The intention behind it is that it gives the government a way to encourage giving to charity without giving directly to charity itself. This is not, in my estimation, a bad idea.

I don't think it is immoral to claim the deductions. Programs exist for a reason and I don't find it immoral to utilize them when the tax dollars you would be paying otherwise could go to causes you find less than moral, such as unjust wars and the like.

 

[MLEN]

B&W,

Thanks for the explanation.

So, just to confirm - in order to get a tax break one must intentionally list it on their tax forms for that purpose. However, if they wanted to keep it totally charitable (i.e., 100% donated with no refund/reduction in taxes payable), all they have to do is just not mention it on their forms? Is this right?

 

[b&wpac4]

B&W,

Thanks for the explanation.

So, just to confirm - in order to get a tax break one must intentionally list it on their tax forms for that purpose. However, if they wanted to keep it totally charitable (i.e., 100% donated with no refund/reduction in taxes payable), all they have to do is just not mention it on their forms? Is this right?

The way you state it is correct.

 

[yasic]

Basically you are listing money you gave to charity as a 'business expense' for all practical purposes. Perhaps some numbers will help.

Lets say you make 100,000 dollars a year and you need to pay 10% taxes or 10,000 dollars a year in taxes.

Without the law, if you decide to give 50,000 dollars of your income to charity, you still will end up paying the full 10,000 to the government. In the end:

You- $40,000
Charity- $50,000
Government- $10,000


With the law, the 50,000 you gave is not considered income so your only taxed for the 50,000 you still have, or $5,000 In the end

You- $45,000
Charity - $50,000
Government- $5,000

It is a little more complicated than this in reality, but that is the basis of it.

As you can see, the charity does not get different amount with or without this law.

 

[MLEN]

I totally understand now Yasic and B&W. And thanks again, as the question came up in an ethics discussion here in my country and I wanted to be able to have a better grasp on the subject.

Take Care and God Bless