In the US, charitable contributions are deductible if and only if you itemize your deductions. Apparently most people in the US don't (only about 35% according to http://www.taxfoundation.org/research/show/22499.html ).
So an awful lot of charitable contributions by US taxpayers don't get deducted.
I have a few questions for my readers. As always, you're perfectly welcome to appropriate any of these ideas if you find them useful.
1) Since a business can basically take off charitable contributions as a cost of doing business, in much the same way as they can take off your salary if you're their employee, why is it that we don't see job benefits of this form offered:
Say you're an 80K/year employee for Acme Enterprises. Acme offers to write an 8K check to your church next year while paying you 72K instead of 80K. In fact, they're willing to instead donate any amount you'd like to your church or favorite charitable organization from the 80K it costs them to employ you. You'd get around the charitable contribution limits (only a certain fraction of your AGI can be deducted, but you can carry it over from year to year), and your deduction would be effectively 'above the line', because it'd never show up as your AGI. This means that any phase outs wouldn't hit you and in many cases you'd just claim the standard deduction instead of itemizing. So why don't we see this on cafeteria benefit plans?
2) People are allowed to give money to other people without tax implications if the gifts are below a certain (fairly large) amount. Could a person in a lower tax bracket not then effectively 'sell' their charitable deduction to another person? Imagine Joe, who is below the threshold of itemization and Bob, who pays nearly 50% between federal, state, and local taxes. Joe gives 1000 each year to the Campus Crusade for Cthulhu. This gift does not lower Joe's taxes a cent. But what if Joe instead gives the money to Bob. Bob then gives 1k to the Campus Crusade, and gets 500 back from Leviathan. Or Bob could give 2k to the work of Cthulhu, receiving 1K back from Leviathan. There are all kinds of 'production possibilities' here. I've heard of companies effectively 'buying losses' for tax purposes. Would something like this be feasible/legal, and if not, why not? Obviously this scheme has the disadvantage of requiring some measure of trust between Joe and Bob.
2 days ago