AndrewSternberg Posted October 29, 2004 Report Share Posted October 29, 2004 In what sense is a tax-deductible contribution 'deductible' -- from what is it deductible? Is it that when you make a contribution it counts as you paying tax, a substitute for paying taxes to the government? This would seem too good to be true. Or, is it that this particular transfer of money, from you to the recipient, is non-taxed? Or, is it something else? I admit I am very ignorant here. To my defense, I only just started paying taxes 2 weeks ago. Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted October 29, 2004 Report Share Posted October 29, 2004 In what sense is a tax-deductible contribution 'deductible' -- from what is it deductible? It may reduce the amount of your income which is subject to taxation (but there are procedures). If you aren't deducting a lot, it basically doesn't "count". Quote Link to comment Share on other sites More sharing options...
Godless Capitalist Posted October 29, 2004 Report Share Posted October 29, 2004 I admit I am very ignorant here. To my defense, I only just started paying taxes 2 weeks ago. Oh, boy! Figuring out tax rules and forms is so much fun! Quote Link to comment Share on other sites More sharing options...
y_feldblum Posted October 30, 2004 Report Share Posted October 30, 2004 I admit I am very ignorant here. To my defense, I only just started paying taxes 2 weeks ago. Oh, boy! Figuring out tax loopholes is so much fun! Quote Link to comment Share on other sites More sharing options...
AndrewSternberg Posted October 30, 2004 Author Report Share Posted October 30, 2004 Lets say I give a 100 dollars to ARI. What effect does this have on my tax payments. Can I get a 100 dollars back on my tax returns? Quote Link to comment Share on other sites More sharing options...
Godless Capitalist Posted October 30, 2004 Report Share Posted October 30, 2004 No, although that would be nice. You could basically give your entire tax payment to ARI instead of the feds. What happens is that you deduct the $100 from your taxable income, so you save the tax you would have paid on that $100. If your top tax bracket is 28%, for example, you save $28. So your donation only costs you $72. I am pretty sure, however, that you can only deduct such contributions if you itemize deductions, which is not worthwhile unless your deductions exceed the standard deduction of around $5000 per person. Most people only itemize if they have mortgage interest or large charitable contributions. disclaimer: Tax rules are hopelessly confusing, so I make no promises about the accuracy of the above. Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted October 30, 2004 Report Share Posted October 30, 2004 Lets say I give a 100 dollars to ARI. What effect does this have on my tax payments. Can I get a 100 dollars back on my tax returns? What you want is income exclusions and tax credits. I have a recollection that one year they gave a $100 credit for charitable contributions, but that was a 1-time thing (and I might have just dreamt it). There is (or was) a bill in the house to give up to $100 tax credit for certain charitable contributions aimed to reduce poverty, but don't hold your breath there. You might look at state laws, because the aforementioned credit in some variant is real in Arizona. Credits are few and far between. Exclusions cover moving expenses, IRA deductions, student loan interest, alimony, and a few other odds and ends. You'd need to have more than $4,750 of deductions for it to be worth itemizing. If your medical expenses (which you pay) are well over $1,800, or you have paid state and local income taxes, suffered a significant theft, or especially are paying a mortgage, then you might squeeze out a few extra dollars. The forms are here, and the "explanation" is here. Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted October 30, 2004 Report Share Posted October 30, 2004 Lets say I give a 100 dollars to ARI. What effect does this have on my tax payments. Can I get a 100 dollars back on my tax returns? I'm sorry, I gave you the wrong answer. There is probably no immediate effect. In the long run, if you and enough others make such contributions, you may get all of your tax money back. Quote Link to comment Share on other sites More sharing options...
Godless Capitalist Posted October 30, 2004 Report Share Posted October 30, 2004 How so, David? Are contributions to ARI not deductible at all? Quote Link to comment Share on other sites More sharing options...
DavidOdden Posted October 30, 2004 Report Share Posted October 30, 2004 How so, David? Are contributions to ARI not deductible at all? To the immediately above? It's an estimation that he can't actually deduct because I'm betting he doesn't pound 4.5K in interest down the rathole for a mortgage (hey, Andrew, we're guessing all about your life!!), so that the standard deduction is the better bet for him. And the remainder was a reminder than the long term benefit of such contributions might, maybe, be something of greater value than a few more bucks back from the feds. Okay, I confess to optimism. Anyhow, they are deductible since they are an educational institution. Quote Link to comment Share on other sites More sharing options...
Godless Capitalist Posted October 30, 2004 Report Share Posted October 30, 2004 OK, so they are deductible but only if he itemizes which he probably doesn't. Right? Andrew if you think this is confusing, I have to deal with self-employment income, dividends, a household employee, capital gains, capital losses, mortgage interest, etc., etc. Last year I even got whacked with the alternative minimum tax. I probably spend a full week per year just dealing with taxes. Quote Link to comment Share on other sites More sharing options...
AndrewSternberg Posted October 30, 2004 Author Report Share Posted October 30, 2004 Your guesses about me have been correct. What I gather is that I should expect no added benefit by contributing to ARI, other than the services that it enables ARI to engage in. Which is enough. Quote Link to comment Share on other sites More sharing options...
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