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Before Trump's tax law which upped the standard deduction to the point very few have the ability to deduct... a benefit of donating yourself is your can deduct

by fma 8y ago

Before Trump's tax law which upped the standard deduction to the point very few have the ability to deduct... a benefit of donating yourself is your can deduct it from your taxes.

smileysteve 8y ago
But, you'd have to recognize it as earned income; and you'd have to pay self employment taxes on it; making the donation cost you money. -- OR -- You file it as income to your sole proprietorship or llc; you "sponsor" something charitable as an expense. Either way, the deduction and the income are at best 0 sum. Though, if it's less than $600; they may not file a 1099 and you may "forget" to report it.
- fma 8y ago
  I'm a little confused on your comment? Is this in regards to how to deduct a donation post-Trump tax law? I'm a regular salaried employee, all my income is reported on a W2. Pre-Trump, if I donated $ to my favorite charity...it's deductible if I exceed standard deduction.
  - smileysteve 8y ago
    Pre 2018 or post are the same for how the deduction is a deduction and not a credit. That is to say that on w2 income you will pay payroll tax and on 1099 you may pay self employment tax -- in addition to income tax. You then get to deduct the income tax only. So the presented case, to get paid a small sum as a contractor that either you or the company will donate to a charity; it's going to be a net 0 or net negative to take the income and then donate it 100% compared to letting the company donate it. The relevant changes were to the standard deduction and the % cap (if you're donating >50% of your income). Technically, the standard deduction doesn't matter here at all, that's a choice, it would be a net negative for the filer to choose itemized over the standard if they don't exceed the standard. The 2018 changes also effect the pass through rate, so there is a small possibility that if you took payment in your pte, you'd be taxed at 21% cap, your business didn't make enough to pay self employment tax, and then you donate the money from your normal earned income at the 22 or 24% rate.

by fma 8y ago

Before Trump's tax law which upped the standard deduction to the point very few have the ability to deduct... a benefit of donating yourself is your can deduct it from your taxes.

smileysteve 8y ago

But, you'd have to recognize it as earned income; and you'd have to pay self employment taxes on it; making the donation cost you money. -- OR -- You file it as income to your sole proprietorship or llc; you "sponsor" something charitable as an expense. Either way, the deduction and the income are at best 0 sum. Though, if it's less than $600; they may not file a 1099 and you may "forget" to report it.

fma 8y ago
I'm a little confused on your comment? Is this in regards to how to deduct a donation post-Trump tax law? I'm a regular salaried employee, all my income is reported on a W2. Pre-Trump, if I donated $ to my favorite charity...it's deductible if I exceed standard deduction.
- smileysteve 8y ago
  Pre 2018 or post are the same for how the deduction is a deduction and not a credit. That is to say that on w2 income you will pay payroll tax and on 1099 you may pay self employment tax -- in addition to income tax. You then get to deduct the income tax only. So the presented case, to get paid a small sum as a contractor that either you or the company will donate to a charity; it's going to be a net 0 or net negative to take the income and then donate it 100% compared to letting the company donate it. The relevant changes were to the standard deduction and the % cap (if you're donating >50% of your income). Technically, the standard deduction doesn't matter here at all, that's a choice, it would be a net negative for the filer to choose itemized over the standard if they don't exceed the standard. The 2018 changes also effect the pass through rate, so there is a small possibility that if you took payment in your pte, you'd be taxed at 21% cap, your business didn't make enough to pay self employment tax, and then you donate the money from your normal earned income at the 22 or 24% rate.