Couple of threads about tax deductibility of donations and it's impact on the donor and the recipient.
Some seem to believe the incentive to donate is simply the tax deduction, I.e. Rather have the charity get it than the government.
Reality is much different as illustrated below.
You have an effective tax rate of 35% and donate $1,000. The impact on the donor is taxes are reduced by $350 so the donor is out of $650 net of the $350 tax reduction. Cost to donor $650, benefit to recipient $1,000.
If potential donor keeps the $1000 then he pays $350 tax and keeps the remaining $650 in his pocket.
The point here the donor has to be motivated by the charity because it cost him 65% of every $1 donated.
Conversely if the tax deduction is not allowed then the donor the donor that could have afforded a $1,000 can now only afford to donate $650.
Some seem to believe the incentive to donate is simply the tax deduction, I.e. Rather have the charity get it than the government.
Reality is much different as illustrated below.
You have an effective tax rate of 35% and donate $1,000. The impact on the donor is taxes are reduced by $350 so the donor is out of $650 net of the $350 tax reduction. Cost to donor $650, benefit to recipient $1,000.
If potential donor keeps the $1000 then he pays $350 tax and keeps the remaining $650 in his pocket.
The point here the donor has to be motivated by the charity because it cost him 65% of every $1 donated.
Conversely if the tax deduction is not allowed then the donor the donor that could have afforded a $1,000 can now only afford to donate $650.
