5 ms·

Can you explain the charity portion, isn’t that the net same as not having the money? Sincere question

by syspec 8y ago

ronyeh 8y ago
Maybe if the charity is called "$YOUR_FAMILY_NAME Foundation" then you can save on taxes and still get to do things you enjoy, like flying your private jet to fight malaria or travel to your country club to play some golf (for charity).
- rubicon33 8y ago
  Ok but how many people really have "$YOUR_FAMILY_NAME Foundation" and AREN'T being carefully watched by the Feds? Honestly, this thread just sounds like something pulled from someone busted on NBC's "Greed" show. Not that I am opposed to reducing one's tax burden, mind you. It's just that this doesn't sound like a feasible way of doing it.
nostrademons 8y ago
You get to control where it goes, rather than the government. For most people, their values are an extension of their identity. (This, BTW, is why we get values voters on both sides of the aisle who vote against their own economic self-interest for a party that supports the kind of world they want to live in.) If you're making 2x+ times what you actually need to live the personal lifestyle you want, the rest is going to shape the world around you anyway. If you give to 501(c)3 organizations whose values happen to line up with yours (or better yet, control your own family foundation so you can set the agenda entirely), you get to write that influence off against the money that you spend on personal expenses. I've often heard of the dividing line between upper middle class and wealthy as "Upper middle class people think income. Wealthy people think control." The vast majority of a wealthy person's wealth is held in various legal fictions anyway - a network of corporations, trusts, funds, and foundations that are each separate legal entities, but are all controlled by members of their family. Who cares if the money is in your name if it's the name of an entity that you can sign for?
- lsc 8y ago
  Right, but the previous comment suggests that you can reduce your personal tax liability to zero while still having some personal money paid to you: "pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes." and that's confusing, 'cause say I can live off $100K/yr. So I pay myself $140K (or whatever) and pay the taxes on that and I have $100K left to pay for groceries and rent or whatever. Sure, my company maybe donated a bunch of money to some nonprofit I liked, and that decreased the company's tax liability. Maybe my company even lost money after the donations, and maybe I get to carry those losses forward... but that's not going to impact the personal income taxes on those wages I pay myself, or personal capital gains tax on the dividends I pay myself. But that's a different thing from the tax liability on that $140K I took out to buy my groceries, and pay my rent. I'm not a tax person, though I have been in the situation of paying both corporate and personal taxes- all I can say is that you need a properly licensed tax person in that situation, even if your business makes less than a google engineer.
  - nostrademons 8y ago
    No, I mean that you pay yourself $100K and then you make a donation of $100K of securities, real estate, etc. to a charity out of assets that you control. You can deduct the full amount of "in kind" transfers to charity, and you don't need to pay the capital gains tax on them. The value of your charitable donation gets subtracted from your AGI, so you really can get to zero task liability this way. Meanwhile, you reinvest the remaining profits of the business so that the total value of your assets goes up by more than the $100K you paid yourself + $100K you donated to charity.
    - AnthonyMouse 8y ago
      > The value of your charitable donation gets subtracted from your AGI, so you really can get to zero task liability this way. Of course, that's how it's supposed to work, because the reason it's set up that way is that if people actually do that, they have to donate $100K to charity in order to reduce their taxes by about a third that amount. Assuming the charity has about equal effectiveness as the government in using the money to benefit society (note that this is not a high bar), allowing the deduction significantly increases the amount of money going to benefit society compared to if the deduction wasn't allowed and as a result the donation wasn't made. You can argue about whether one organization or another shouldn't be considered a charity, but that's a separate question as to whether charitable donations should be deductible in general.
bsder 8y ago
You can donate to your church who can then fund an anti-gay political campaign and neither of you get taxed on the money. If you tried to fund that directly, you would have gotten taxed on it first before you could spend it. Why, yes, I am still salty that the Mormons didn't get their tax-exempt status revoked over Prop 8 in California. Thanks for asking.
- nostrademons 8y ago
  [removed - this was not intended as a political comment but somehow it became such]
  - bsder 8y ago
    Planned Parenthood Federation of America (PPFA) is a tax-exempt 501c3 and does health care. Planned Parenthood Action Fund (PPAF) is a properly taxed 501c4 and does political action. Planned Parenthood are quite scrupulous about this given how often they wind up in the crosshairs. Would that the religious organizations received such scrutiny. Please take your GOP disinformation points somewhere else.
    - deleted 8y ago
      [deleted]
blihp 8y ago
You set up your own charitable foundation/trust which you control. While technically not your money anymore, you get to decide how it gets spent. I even heard about a man who had his charity buy a portrait of himself ;-) Snark aside, lots of people with money do this and while they don't technically ever get to see that money themselves again, they can and do spend it in exchange for influence/favors.
- gnicholas 8y ago
  There are limits on how much you can deduct when donating to a foundation you control. So you can’t wipe out all of your income this way, whereas there aren’t the same type of limits on donations to unrelated charities.

Can you explain the charity portion, isn’t that the net same as not having the money? Sincere question

by syspec 8y ago

Can you explain the charity portion, isn’t that the net same as not having the money? Sincere question

Maybe if the charity is called "$YOUR_FAMILY_NAME Foundation" then you can save on taxes and still get to do things you enjoy, like flying your private jet to fight malaria or travel to your country club to play some golf (for charity).

rubicon33 8y ago
Ok but how many people really have "$YOUR_FAMILY_NAME Foundation" and AREN'T being carefully watched by the Feds? Honestly, this thread just sounds like something pulled from someone busted on NBC's "Greed" show. Not that I am opposed to reducing one's tax burden, mind you. It's just that this doesn't sound like a feasible way of doing it.

nostrademons 8y ago

You get to control where it goes, rather than the government. For most people, their values are an extension of their identity. (This, BTW, is why we get values voters on both sides of the aisle who vote against their own economic self-interest for a party that supports the kind of world they want to live in.) If you're making 2x+ times what you actually need to live the personal lifestyle you want, the rest is going to shape the world around you anyway. If you give to 501(c)3 organizations whose values happen to line up with yours (or better yet, control your own family foundation so you can set the agenda entirely), you get to write that influence off against the money that you spend on personal expenses. I've often heard of the dividing line between upper middle class and wealthy as "Upper middle class people think income. Wealthy people think control." The vast majority of a wealthy person's wealth is held in various legal fictions anyway - a network of corporations, trusts, funds, and foundations that are each separate legal entities, but are all controlled by members of their family. Who cares if the money is in your name if it's the name of an entity that you can sign for?

lsc 8y ago
Right, but the previous comment suggests that you can reduce your personal tax liability to zero while still having some personal money paid to you: "pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes." and that's confusing, 'cause say I can live off $100K/yr. So I pay myself $140K (or whatever) and pay the taxes on that and I have $100K left to pay for groceries and rent or whatever. Sure, my company maybe donated a bunch of money to some nonprofit I liked, and that decreased the company's tax liability. Maybe my company even lost money after the donations, and maybe I get to carry those losses forward... but that's not going to impact the personal income taxes on those wages I pay myself, or personal capital gains tax on the dividends I pay myself. But that's a different thing from the tax liability on that $140K I took out to buy my groceries, and pay my rent. I'm not a tax person, though I have been in the situation of paying both corporate and personal taxes- all I can say is that you need a properly licensed tax person in that situation, even if your business makes less than a google engineer.
- nostrademons 8y ago
  No, I mean that you pay yourself $100K and then you make a donation of $100K of securities, real estate, etc. to a charity out of assets that you control. You can deduct the full amount of "in kind" transfers to charity, and you don't need to pay the capital gains tax on them. The value of your charitable donation gets subtracted from your AGI, so you really can get to zero task liability this way. Meanwhile, you reinvest the remaining profits of the business so that the total value of your assets goes up by more than the $100K you paid yourself + $100K you donated to charity.
  - AnthonyMouse 8y ago
    > The value of your charitable donation gets subtracted from your AGI, so you really can get to zero task liability this way. Of course, that's how it's supposed to work, because the reason it's set up that way is that if people actually do that, they have to donate $100K to charity in order to reduce their taxes by about a third that amount. Assuming the charity has about equal effectiveness as the government in using the money to benefit society (note that this is not a high bar), allowing the deduction significantly increases the amount of money going to benefit society compared to if the deduction wasn't allowed and as a result the donation wasn't made. You can argue about whether one organization or another shouldn't be considered a charity, but that's a separate question as to whether charitable donations should be deductible in general.

bsder 8y ago

You can donate to your church who can then fund an anti-gay political campaign and neither of you get taxed on the money. If you tried to fund that directly, you would have gotten taxed on it first before you could spend it. Why, yes, I am still salty that the Mormons didn't get their tax-exempt status revoked over Prop 8 in California. Thanks for asking.

nostrademons 8y ago
[removed - this was not intended as a political comment but somehow it became such]
- bsder 8y ago
  Planned Parenthood Federation of America (PPFA) is a tax-exempt 501c3 and does health care. Planned Parenthood Action Fund (PPAF) is a properly taxed 501c4 and does political action. Planned Parenthood are quite scrupulous about this given how often they wind up in the crosshairs. Would that the religious organizations received such scrutiny. Please take your GOP disinformation points somewhere else.
  - deleted 8y ago
    [deleted]

blihp 8y ago

You set up your own charitable foundation/trust which you control. While technically not your money anymore, you get to decide how it gets spent. I even heard about a man who had his charity buy a portrait of himself ;-) Snark aside, lots of people with money do this and while they don't technically ever get to see that money themselves again, they can and do spend it in exchange for influence/favors.

gnicholas 8y ago
There are limits on how much you can deduct when donating to a foundation you control. So you can’t wipe out all of your income this way, whereas there aren’t the same type of limits on donations to unrelated charities.