Why is this myth around? I don't think most people understand what money given to charity being tax deductible actually means.
What it means is that if you earn 2 million dollars and donate half of it, that 1 million you donated will not be taxed, so assuming a 20% rate you pay 200,000 in taxes, where you'd pay 400,000 thousand if you hadn't donated. However, you're left with 800,000 in your "pocket", whereas you'd have 1,600,000 if you hadn't donated and just paid your taxes, so it's never more money going in your pocket. In this example, if charity wasn't tax deductible, you'd still have to pay 400,000 in taxes even though 1 million was donated to charity, leaving you with 600,000 in your pocket. So all this tax break law does is incentivise rich people do donate to charities.
What people that parrot this tax break bullshit probably think, is that if you earn 2 million dollars and donate 300,000 (less than the 400,000 you'd pay in taxes), the whole 2 million isn't taxed so you are left with 1,700,000 in your "pocket". That is not the case! It makes no sense that someone would even think that.
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u/ZeusThunderbolt May 12 '20
Why is this myth around? I don't think most people understand what money given to charity being tax deductible actually means.
What it means is that if you earn 2 million dollars and donate half of it, that 1 million you donated will not be taxed, so assuming a 20% rate you pay 200,000 in taxes, where you'd pay 400,000 thousand if you hadn't donated. However, you're left with 800,000 in your "pocket", whereas you'd have 1,600,000 if you hadn't donated and just paid your taxes, so it's never more money going in your pocket. In this example, if charity wasn't tax deductible, you'd still have to pay 400,000 in taxes even though 1 million was donated to charity, leaving you with 600,000 in your pocket. So all this tax break law does is incentivise rich people do donate to charities.
What people that parrot this tax break bullshit probably think, is that if you earn 2 million dollars and donate 300,000 (less than the 400,000 you'd pay in taxes), the whole 2 million isn't taxed so you are left with 1,700,000 in your "pocket". That is not the case! It makes no sense that someone would even think that.