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I know people who do the same thing with charitable donations. They donate to an organization because they "need the tax deduction". Despite that they'd have mo

I know people who do the same thing with charitable donations. They donate to an organization because they "need the tax deduction". Despite that they'd have more money in their pocket if they just didn't make the donation in the first place.

dionidium 9y ago
When most people bring up tax deductions in casual settings it's pretty obvious pretty quickly that they don't really know what a tax deduction is. And the odds quickly approach 1 if they use the phrase "write-off."
- nsxwolf 9y ago
  It seems to be the common understanding among many that a "write off" of a business expense like a laptop or something means you get that thing for free. I wonder if this is the result of most people taking the standard deduction instead of itemizing at tax time.
  - pc86 9y ago
    I think it's the result of them probably getting paid a salary out of their business, and the laptop being purchased in December or January makes no difference to their actual take home pay (assuming they're not distributing 100% of profit). But that being said, a 15-30% discount because you used a different credit card to buy it is a pretty good incentive.
  - dionidium 9y ago
    Yes. I know lots of folks living in cheap Midwestern housing who think they're getting a great deal on the mortgage interest rate deduction, but who almost certainly have deductions at or below the standard amount. I'd venture that a lot of people are typing all this info into their tax software, which summarily throws it all away without them really understanding that that's what's happening. Regular folks just do not get this stuff and it's silly that we have such a complicated system.
sbarre 9y ago
Yeah but the upside of that particularly ignorance is that a charity gets a donation.. Win-win in my book.
danans 9y ago
They might benefit indirectly from the donation in a way they couldn't by spending the money themselves, while also getting an income tax deduction.
- nsxwolf 9y ago
  I'm separating the people I'm talking about from people that actually just want to make donations because of the social good. This other group seems to have no interest in making contributions other than their own misunderstanding of what a tax deduction is.
- ams6110 9y ago
  Other than "feeling good" you can't derive personal benefit from a deductible donation.
  - danans 9y ago
    That's not true. If the donation helps enable a societal outcome that you benefit from (i.e. a donation to a local environmental cleanup nonprofit organization results in a cleaner park for you to enjoy), then you can benefit. You can't derive an exclusive personal benefit from it, of course. If you did, it would be tax fraud.
  - thomas_howland 9y ago
    Depending on how underwithheld you are, you can avoid tax underpayment penalties.

dionidium 9y ago

When most people bring up tax deductions in casual settings it's pretty obvious pretty quickly that they don't really know what a tax deduction is. And the odds quickly approach 1 if they use the phrase "write-off."

nsxwolf 9y ago
It seems to be the common understanding among many that a "write off" of a business expense like a laptop or something means you get that thing for free. I wonder if this is the result of most people taking the standard deduction instead of itemizing at tax time.
- pc86 9y ago
  I think it's the result of them probably getting paid a salary out of their business, and the laptop being purchased in December or January makes no difference to their actual take home pay (assuming they're not distributing 100% of profit). But that being said, a 15-30% discount because you used a different credit card to buy it is a pretty good incentive.
- dionidium 9y ago
  Yes. I know lots of folks living in cheap Midwestern housing who think they're getting a great deal on the mortgage interest rate deduction, but who almost certainly have deductions at or below the standard amount. I'd venture that a lot of people are typing all this info into their tax software, which summarily throws it all away without them really understanding that that's what's happening. Regular folks just do not get this stuff and it's silly that we have such a complicated system.

sbarre 9y ago

Yeah but the upside of that particularly ignorance is that a charity gets a donation.. Win-win in my book.

danans 9y ago

They might benefit indirectly from the donation in a way they couldn't by spending the money themselves, while also getting an income tax deduction.

nsxwolf 9y ago
I'm separating the people I'm talking about from people that actually just want to make donations because of the social good. This other group seems to have no interest in making contributions other than their own misunderstanding of what a tax deduction is.
ams6110 9y ago
Other than "feeling good" you can't derive personal benefit from a deductible donation.
- danans 9y ago
  That's not true. If the donation helps enable a societal outcome that you benefit from (i.e. a donation to a local environmental cleanup nonprofit organization results in a cleaner park for you to enjoy), then you can benefit. You can't derive an exclusive personal benefit from it, of course. If you did, it would be tax fraud.
- thomas_howland 9y ago
  Depending on how underwithheld you are, you can avoid tax underpayment penalties.