How can I determine how much to contribute to charity to reduce US federal taxes?
How can I determine how much to contribute to charity to reduce US federal taxes?
I’m an American sick of being taxed by the dysfunctional US federal government and am looking for ways to reduce the amount paid as well as increase my contribution to society. I’m not looking to reduce state taxes.
How can I find out the amount I can donate to charities each year such that it reduces my federal taxes as much as possible for my income level?
Tax write offs don’t really work the way people think they do. You reduce your taxable income by the amount you donate but you don’t pay 100% of your taxable income to the government.
So charity is like an inverted tax where you lose 80% of your money instead of the 20% you pay to the government.
Rich people make can make it work sometimes by donating assets that have an inflated value and otherwise don’t translate well to “income”.
Businesses operate very differently because they’re taxed on profits not income. So when you hear about businesses not paying taxes it is because they’ve cooked the books to have less “profit”.
Yep, you are spending $1 to save yourself ~$0.45
In most cases with rich people the two hacks are
Also like... other ways. Rich people go to extreme lengths to avoid paying taxes and some of those methods are truly bizarre.
But hey, as long as they all donate 1 million to his inauguration fund, Trump doesn't give a shit.
Sort of; I object only to the way you presented it, not the facts.
You're donating to a cause, which I assume you believe in, which reduces the value used to calculate your taxes. If you make $10, and you donate $1 to a charity, you get taxed as if you made $9. This applies to all income taxes, since state taxes are based largely on your taxable federal income. So OP could try to do something like do their fed taxes and instead of copying "$9" put "$10” where their state forms say to use the federal value, but that's likely to raise a flag somewhere.
My main issue is the portrayal that donations are "spending money." You could probably successfully argue that "donating" satisfies the definition of "spending money", but that does a disservice to charity.
Also, just as an aside, OP would never save $0.45 on a dollar donation. No income tax bracket is that high except for the very rich, and they have many other ways to avoid paying taxes that in no way benefit charities.