Why do wealthy individuals primarily donate for tax benefits? Uncover the truth behind charitable giving motivations and tax incentives! #charity #taxwriteoff #wealthydonors #philanthropy
What motivates affluent individuals to donate to charities mainly for tax advantages? Discover the real reasons behind their giving habits! #donations #taxdeductions #philanthropicintentions
Unveiling the common belief that the wealthy only donate for tax write-offs. Gain insights into the complex relationship between philanthropy and tax incentives! #charitablecontributions #taxbenefits #generosityofsociety
Because a lot of people don’t understand anything about taxes, tax brackets, write offs, any of it. Mostly it’s people just babbling incoherently.
They are losing money.
People who say that do not understand how tax write-offs work.
However, inflated donations can be made to make money on tax write-offs. Trump does this. Trump donates a signed picture of himself and makes up a value for it. It really costs him basically nothing, but he claims it has a huge value and deducts that from his taxes.
It’s folks who don’t understand how tax write offs work using their ignorance to downplay something positive done by someone they don’t approve of.
Nonprofits, including 501(c)3 organizations, can make a profit from activities that are related to their mission and purpose. *Profits from these activities are tax-exempt.*
######Nonprofits can make money in a number of ways, including:
* Stock donations
* Planned gifts
* In-kind contributions
* Grants
* Government entities
* Public charities
* Community foundations
* Family foundations
* Private foundations
This is why.
You are correct.
If you’re in the 25% tax bracket, let’s say you donated $1,000 to a charity during the tax year. That $1,000 donation to charity would reduce your taxable income by $1,000. If you were to owe 25% tax on that $1,000, the donation would effectively save you $250 on your tax bill, but you’d have effectively gone in the negative on $750 in the end.
Let’s say Paul McCartney buys a guitar for $100. He donates this guitar, signed, to a charity auction and sells it off for $10,000. He can now claim he donated $10,000.
the tax write off can be a contributing factor but most people with large amounts of money to give are doing so to progress a mission they believe in, have influence or name recognition or just for the happy feelings.
Because if the rich people actually cared we would see a change in the world, they give the bare minimum to avoid giving more.
All these assumptions are based cash, which is what people aren’t getting. Rich people don’t traditionally donate cash, they donate *assets.*
The value of assetts is ambiguous, so they can donate assets that are appraised at $10mil, but those assets, when sold/liquidated for cash, only end up being worth half that. Rich person just got a $10 mil write off on $5 mil worth of assets. The charity doesn’t fight this because it’s difficult to win/prove that it was just a stone’s throw away from fraud, and if they did win, they’d have to give the money back.
Rich people will also double-dip by investing their cash into assets, funds, and other such things that are tax-exempt (like charities), then use those assets, stocks, bonds etc to pay for other things that can be appraised at higher potential values to then donate them and get the tax write-off on what is, essentially, free money. They can then convert whatever assets/stocks/IRA’s/etc into something else that can be withdrawn/liquidated tax-free, as well, thereby allowing them to once again bypass taxes.
Ultimately, you and I are taxed on 80-90% of every instance of our money moving from one hand to another, while rich people have access to methods of moving money from one hand to another and only being taxed 10-20% of the time.
Because you assume they just donate money, that’s not how their donations work. They often just run very stupid transparent money laundering schemes.
Because many of the organizations they donate to are founded by them
Because they’re ignorant
I’m not rich, but I own a business. Any donation I make is on behalf of the business. My business gets a deduction, but the donation(s) won’t go above my standard deduction that I get for my household income.
A lot of them donate to non profits that they also control so they get tax write offs but still get some direction on what the money does
So the most economical way to donate is to start your own 501c3 that addresses a community need and then use the post as a job resource for your friends. That way your donations go directly to a cause you are passionate about and the allowable, each State has a different amount, administrative percentage of donations goes directly to your friends. This way you get to the maximum tax write off for your donations, keep your friends gainfully employed and assist in meeting the needs of the community. In this way it is a WIN WIN! I did this in Oklahoma
The average public doesn’t know a “tax write off” from a “tax credit” from a “tax deduction” etc.
That’s not necessarily a criticism, it’s kind of ridiculous how complicated our system is.
However, being charitable at any income level means you get a fraction of the money you donate “back. So there is giving in any scenario.
its not just for tax write offs, a decent portion is also PR, can also be legacy building (getting something with your name on it) or a small portion are for honest wanting to do good though those that become wealthy are vastly more likely to be lacking in empathy that would lead them to do that.
Because they donate to the charities of their rich friends, so they just shift money and keep it in the same circle to avoid giving it to the government. In turn they gain power and get a tax write off.
They also donate to control society. But when they “donate” to “charitable” legal vehicles they control they aren’t donating shit, they’re tax dodging, aka stealing.
That is not true. In my opinion donating for tax purposes defeats the purpose of donating.
I have been donating ( money and other materials ) for years but almost never deduct any.
For me and family just donating to help is good enough.
Most of what people are saying here is correct. In addition, the ultra-rich often have their own foundations. They can donate to the foundation AND direct where the funds go. Sometimes the funds could indirectly benefit them. Let’s say they set up a foundation “dedicated to preserving wildlife and forests.” The foundation then purchases thousands of acres of land that just happens to be located adjacent to the ultra-rich person’s vacation home. They have effectively acquired the land with a tax write-off and avoided property taxes. Of course, they are also limited in what they can do with the land, but if the goal is unfettered access to wildlands and no one can build near you? Mission accomplished.
Cause it’s usually true
well we set up a simple situation.
i own a business that sells food. But i know mike who runs a charity to feed the starving. i say “hey mike, hows about i give you a million bucks as a donation.” so mike gets my money and then he needs to spend it on food. i happen to sell food, so i’ll give him a deal (while still making a profit) so he gives me my own money back (that i’m writing off) and in return i’m giving him food (which is not worth what he’s paying, since i’m making a profit on it.)
now we can pretend that I’m both guys at the same time. It’s all a bit more complex than that, but you get the point.
The issue in my opinion is that a lot of these donations are kind of a closed loop. They have “charities” and foundations or trusts they set up themselves and they can write off donations that they can gain some advantage anyway. Let’s say I’m a billionaire, I set up “Americans for education” foundation, I can say it’s a non profit and write it off from my business or personal income and then direct the organization to donate money to schools or influence politicians to let’s say promote policies that loosely are based in education but have a certain political tilt. From the outside you might say: “wow what a great guy donating millions to education” but as we know nothing ever is free. But yeah they save a little money on taxes but they gain something almost always as well
Sometimes, a rich person forms their own charity, installs themselves as CEO of the non-profit that manages that charity, establishes their annual salary as … let’s say … 5 million dollars, and then donates 5 million dollars of his income to that charity.
The 5 million the person donates of their personal money (presumably from their ordinary, otherwise taxable income) reduces their tax liability; and the 5 million they make from the non-profit might be subject to additional tax exemptions based on the “charitable work” the CEO does for the non-profit.
It isn’t a *wide open* tax loop-hole or anything; but on top of everything else, it can save the wealthy a decent amount of money.
Some people say this to make themselves feel less-bad about NOT donating money themselves.
Because people (most people) don’t understand what a tax write off is.
Because that’s what they do, they write it off.
More importantly, keep in mind that charity is how the ultra wealthy launder their reputations. If you look at what they give as a % of net worth it’s usually significantly lower than the average person. Further it doesn’t matter what kind of asshole you are, how many lives you ruined, how horrid your business practices were, if you gave away some money the first line on your wiki article and your obituary will read “philanthropist.”
There are ways to use tax write-off donations to just launder money. I don’t know what percentage of big money donations fall into this category but some do (especially when the rich guy makes his own foundation and puts himself and all his family and friends on the board — lots of times they just spending their own and other people’s money throwing big parties for themselves and getting tax breaks and public credit as though they’re helping people).
But the real criticism is a little more nuanced, but the history of tax write-off donations started with the robber barons making a big show of donating money to make a hospital to distract from their mines and factories crippling workers, their hired goons beating up or shooting striking workers, etc. The easiest way to become a ‘good billionaire’ is to make a big show of giving away your money, and very often that money doesn’t really get very far from the guy’s pockets anyway.
If rich people were actually charitable they would vote to help the common man not subdue him. They would pay their taxes and not kneecap the IRS. They wouldnt instill mistrust in our institutions for their own gain. They wouldnt lobby our congress to further their own special interests. They wouldnt pay their workers the lowest possible salary and squeeze the maximum work from them and they wouldnt reap all the benefits of being wealthy while knowingly seeking to withhold them from anyone who cant afford them.
The thing about taxes are they are only simply if you’re relatively poor. If you have investments in multiple sectors, income from owned companies, incomes from things like royalties, and more, you dont just add them all up and pay the federal tax on them. You pay an expert accountant to find every loophold that allows you to “hide” this or that income or reduce it, move it here or there, leave it alone, collect or ignore interest/gains, and so on so that youre 60 million might only legally be taxed at much, much lower and you can happily pay your 25% federal taxes on 2 million while 58 million sit in their tidy little cubbies waiting for you at your liesure.
Charitable donation is only 1 potential part of this, it isnt like multi millionaires somehow make money by donating it. Its that it is 1 possible tool but one that can provide other benefits – like good PR, or helping out your boy’s non profit (that he doesnt pay taxes from) and maybe next time he’ll donate to your wife’s non profit instead.
For regular people, and i mean working class, it’s effectively never profitable to give wealth in order to reduce taxable income. You start to see high high tax rates for double earning families with excellent salaries, like 2 heart surgeons or some shit. They will already likely be “hiding” income legally by putting it into things like iras or even a private business they then claim a loss in that is actually a year over year gain.
Thing is, accounts and advisors can tell you how to make moves in in order you minimize your taxes – rich people make more money dodging taxes than it might be wirth to invest in a business to increase total income
I’m not rich but have enough to do the following, which is as close as I know how to get to “making money”. Payoff at the end, but you cant skip any steps. It’s not just “write off = free money.” It takes planning. In my case, it depends on charitable giving as well, which is where we start. (If you don’t donate charitably, feel free to skip this post).
1. Donate appreciated stock to a donor advised fund. Say you paid 75k for some stocks, they’re now worth $125k, and if you sold, you would have $50k in capital gains – for our purposes, let’s say short term. In our example, that would be 35% of $50k. Choose your year for this to coincide with the steps that follow.
2. Deduct the total $125k from your income. For our purposes – you get another 32% back from the total.
3. Wisely, you’ve timed when to sell depreciated stocks to coincide with the year you max your donations. So, you take another, say, $50k off.
4. Now, suppose you have a nice house with $20k/year property tax. You can pay 2 years in the same calendar year. So, you take off $40k, because those taxes are deductible. And so on, until with the aid of your deduction, **you are** ***lowered into another tax bracket.*** Say you went from 32% to 24%. You just saved 8% of everything you made between $192k to $364k. This can be amplified by state income tax savings if you live in a state with income tax (I don’t) and it’s calculated on adjusted gross.
If you plan ahead, time things precisely, you can end up not making money, but certainly incentivized to write off losses as donations. Also, this works nearly as well with smaller numbers – so long as you itemize. The good part is that I’m certain I’ve ended up donating more than I would have otherwise. I just use the donor advised fund to contribute to causes instead of writing personal checks. Goes to the same places.
Because hating rich people is cool apparently
Jealousy over not having the same drive and ambition to be successful.
The people here doing the basic math “if I donate $1000, here is the tax”, are all correct,….. but that’s not the type of shenanigans the super rich pull.
Consider someone who buys 10 paintings for $1M, maybe uses their personal connections in the art world to talk up the aspiring artist, and then get them appraised 10 years later for $50M. They donate that collection to a public gallery for the appraised value, and get a write off equal to the appraised value.
Or consider someone who makes $10B taking a company public. Before any tax comes due, they start a charity in their name and donate their entire fortune. They now bypass ever paying taxes on that money, still have full control on the money itself (within reason), can pay themselves any salary from the charity itself (although that is taxed), and only need to use something like 4% of the total assets each year to maintain charitable status.
Even if all the money in that fund eventually does get donated or taxed, think about the control. What if the use of that funds is very different than what the government would have spent it on? What if they were doing nothing but building parks and schools for kids, but only in their own super rich area? The government doesn’t get tax revenue to fund veterans, roads, medicare, schools for poor kids, etc, but these rich kids do even better. That hardly seems fair.
That’s the kind of shenanigans people get rightly mad about.
Yes, but they are deciding where to put the money.
It doesn’t matter so much if they donate to something like Doctors Without Borders, rather than have their taxes go toward government spending that, in part, might have similar good effects for people around the world. (Though you can still presumably see the difference even there.)
But what if some rich person is a member of, let’s say, the Society For Overthrowing Civil Society and Replacing All Public Institutions With Agencies Controlled by Private Armies? Then in that case, they *definitely* don’t want their tax money to go to the government. That same government will (hopefully!) fight their aims tooth and nail. So they would want to eliminate their tax contributions by instead donating to this “charitable” organization.
Yes it is still an expense. But you can see how for someone who is sufficiently motivated, it would be appealing or even vitally necessary that they do it this way.
The only people who say this don’t know how write-offs work.
It’s not a one-step process. For example, Bill and Melinda Gates donate money to the Bill and Melinda Gates Foundation. Those donations are a tax write-off, but they still control the money. So instead of paying taxes and having voters & their elected officials decide how the money is spent, Bill & Melinda Gates decide how it’s spent. Not only that, they then get to taut “their” achievements for prestige and recognition.
Now keep in mind billionaires have *thousands* of ways they cheat taxes, donating to a charity they control is just one of them.
Because it makes people feel better about themselves not donating . As if a rich asshole would do something out of the goodness of their hearts that I don’t do
Art Tax Write off scheme.
1. Comission an artist to make a 1 of a kind piece of art for 100k.
2. Pay an art appraiser 50k to appraise it for 1,000,000.
3. Donate the piece of art to the charity you own, and take 1,000,000 Tax write off.
4. Have the Charity you own then sell it to a Muesum/Gallery for 1,000,000. You are wondering is it good art? well it must be good its appraised for 1,000,000.
5. Profit-So not only do you get a 1,000,000 tax write off. The charity you own now has 1,000,000 dollars. Which also how we end up with such shitty modern art in muesums with hugely inflated prices and the idea if its exspensive it must be good.
Because when Billionaire X donates to a charity it’s usually to Billionaire X’s “Charitable” Foundation.
Trump once donated a painting of himself to his own charitable organization then had it hung in the headquarters of that organization and that was considered a several thousand dollar value donation.
Do you mean donate items, or money? I mean rich people clean out their closets and home items like everyone else. Why wouldn’t they donate the stuff to charity? What else would they do with it?
If you mean giant checks…*regular* rich people, like not the ones you could name or ever see in the news, do it to support certain causes. Sure they’ll deduct the charitable donation from their taxable income at the end of the year, but it’s still giving away money. Barring some crazy schemes discussed here, which are definitely NOT the norm, they don’t come out ahead. The gain is still in meeting personal philanthropic goals.
If you ask them, they’ll usually say something like “I’d rather (charity/cause) have it than the government”.
For some rough thumbnail…Donating $10,000 to charity reduces their taxable income by $10,000. If they’re in the highest tax bracket, 37%, (nevermind marginal taxes for a minute) that means they reduce what they owe the government by $3700. But they’re still out $10k.
Many are donating to friends kid’s private education and getting the $ right back. They have all kinds of tricks for just using it as a way to put the $ right back into their pockets.
Super rich folks have several loopholes they can use to avoid paying taxes.
Private Planes and Luxury Yachts Aren’t Just Toys for the Ultrawealthy. They’re Also Huge Tax Breaks. https://www.propublica.org/article/private-jets-yachts-wealthy-tax-deductions-irs-files
How the Ultrawealthy Use Private Foundations to Bank Millions in Tax Deductions While Giving the Public Little in Return https://www.propublica.org/article/how-private-nonprofits-ultrawealthy-tax-deductions-museums-foundation-art
Ten Ways Billionaires Avoid Taxes on an Epic Scale https://www.propublica.org/article/billionaires-tax-avoidance-techniques-irs-files
The wealthiest Americans avoided billions in taxes by voluntarily doing something most only do out of necessity: borrowing money. https://www.businessinsider.com/american-billionaires-tax-avoidance-income-wealth-borrow-money-propublica-2021-6?op=1