Prepaying taxes

[ultrarunner]

Car donations were huge at one time... but now they are sold and the proceeds reported so this has made the numbers realistic as to value...

Mom tithes regularly to her church plus for years provided transportation for those with Doctor Appointments...

Her CPA said she would come out much better making two years worth of donation in one year and skipping the next... but she was not having any of that...

 

[ning]

It's not that people *won't* give to charities any more at all; they'll just be able to give less if they don't get a deduction for it.

In some cases, the result will be more dramatic.
My employer will match up to 6k/year in charitable deductions.
Last year I paid about 21% in fed income tax on my AGI, so my donating $1000 cost me $790 and resulted in a charity getting $2000.
Next year, to have the same personal cash flow from my wallet, I'd be donating $790, costing me $790, and a charity would be getting $1580.

 

[teejk]

The federal government effectively subsidizes charitable giving. If you can afford to give $1000 to charity, but you are getting 15% "back" in tax deductions you can really afford to give $1150.00 to charity because you save that other $150 on taxes. Now with out the deduction gone you only give $1000 because you are not getting $150 back on taxes. So the charity just lost out on $150.00.

Tax policy is certainly used to drive social issues. Home Mortgage interest deductions drive home ownership. Deducting charitable donations drives donations to charity.

I serve on the board of a local charity. We are certainly concerned that people will give less because they do not get the tax benefit.

So in your example people won't donate the $1,000 because they don't get to see the $150 benefit (that they still get via the new standard deduction but just don't see it itemized as such)? Maybe I'm different but getting a tax deduction has never influenced my decision to donate to causes that I believe in. Further to that point, I give money to the NRA which is never tax deductible, rather I just do it.

 

[buckeyefarmer]

Its nice to get a tax break for charitable giving, but i would give even if it wasn't deductible, and i think most others will to.

 

[teejk]

It's not that people *won't* give to charities any more at all; they'll just be able to give less if they don't get a deduction for it.

In some cases, the result will be more dramatic.
My employer will match up to 6k/year in charitable deductions.
Last year I paid about 21% in fed income tax on my AGI, so my donating $1000 cost me $790 and resulted in a charity getting $2000.
Next year, to have the same personal cash flow from my wallet, I'd be donating $790, costing me $790, and a charity would be getting $1580.

So you are saying that the higher standard deduction will cover everything other than your charitable contributions (i.e. you plan to keep that all for yourself)? In reality nothing has changed for most people other than you are given a lump sum of money with no questions asked. Say for a married couple with the new standard deduction of $24,000, you are maxed at $10,000 on taxes, leaving $14,000. Your medical is already limited via a "haircut" depending on your AGI (but say barring any dramatic out of pocket expenses might work out to $10,000 when you run through the numbers). That leaves $4,000 to play with (or keep). I'm hardly a fan of this tax bill #1 it failed big time on simplification (Turbo tax is still alive and well because it still has a number of "side calculations") and #2 the "façade" of the higher standard deduction is largely offset by the loss of the personal exemptions but it is the reality.

 

[ning]

That leaves $4,000 to play with (or keep)

You do understand what a standard deduction is, right?
That 24k isn't a credit - it just reduces your taxable income by a standardized amount (24k in this particular case) and thus that's saying that the first 24k of your income isn't taxed.
There's nothing to play with - taxes are for real.

 

[teejk]

You do understand what a standard deduction is, right?
That 24k isn't a credit - it just reduces your taxable income by a standardized amount (24k in this particular case) and thus that's saying that the first 24k of your income isn't taxed.
There's nothing to play with - taxes are for real.

Huh? I played in the tax cesspool for 30+ years so I know how the stuff works (in retrospect I should have chosen plumbing). Sorry that I didn't state that the tax benefit of the $4,000 was yours to keep...might be 0, might be $1,200 depending on your tax bracket. Nothing has changed though...the old standard deduction (or itemized deductions) were also in pre-tax dollars. Any more questions?

 

[murph1]

Its nice to get a tax break for charitable giving, but i would give even if it wasn't deductible, and i think most others will to.

State and local taxes will NOT be deductible at all.

 

[teejk]

State and local taxes will NOT be deductible at all.

Depends on your particular situation. For many still deductible but now buried in the higher standard deduction so you won't see it itemized as taxes. Preliminary estimates are that most people won't get beyond the new standard deduction. But step back and figure that to exceed the standard deduction you have to spend the money. Depending on your tax bracket that might return zero, might return 35 cents. I'd rather have the dollar I had to spend.

 

[murph1]

Depends on your particular situation. For many still deductible but now buried in the higher standard deduction so you won't see it itemized as taxes. Preliminary estimates are that most people won't get beyond the new standard deduction. But step back and figure that to exceed the standard deduction you have to spend the money. Depending on your tax bracket that might return zero, might return 35 cents. I'd rather have the dollar I had to spend.

part of getting that 24k is you losing the state and local tax credit.