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Attolia

Taxes are looking super high - why?

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8 minutes ago, regentrude said:

But under the old code they would have had both the dependent deduction AND the AOC.

Yes. I really do understand that. 

We made the exact same as last year and are getting a much bigger refund. My comment was really just to point out that some people did benefit. We did to the tune of several thousand dollars, even though we lost the dependent deduction. 

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3 minutes ago, regentrude said:

The effect is twofold.

1. People are always more likely to donate if they are getting something in return. Otherwise, organizations wouldn't run fundraiser dinners, charity 5ks, trivia nights, send stupid trinkets in the mail... it's psychology.

2. this will be the smaller effect: People  can afford to donate $100, but know they will get back $20 in taxes, so they can actually donate $120.

ETA: "Charitable giving" does not automatically translate into "giving to people in need". A lot of charitable giving, for example, funds the arts. Where you don't see a starving child or homeless mom - the need is more subtle, and yes, people absolutely stop donating to orchestras, outreach programs, women's cultural centers

But why? If they believe those things are important and needful and know that they are run through donations, why would they stop giving because they don't get money back? It's still charitable giving, right?

I get some of the psychology of organizations hosting events or sending trinkets. I do understand that it is nice to have a tax deduction for charitable giving. I don't understand only giving because you're getting your money back via the tax code/government. That kind of grosses me out a little. The same as it would if people were only donating to get a trinket in the mail or to go to a nice dinner. 

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3 minutes ago, EmseB said:

But why? If they believe those things are important and needful and know that they are run through donations, why would they stop giving because they don't get money back? It's still charitable giving, right?

I get some of the psychology of organizations hosting events or sending trinkets. I do understand that it is nice to have a tax deduction for charitable giving. I don't understand only giving because you're getting your money back via the tax code/government. That kind of grosses me out a little. The same as it would if people were only donating to get a trinket in the mail or to go to a nice dinner. 

I think the impact is much more that people give less than people stop giving.  If someone is someone in the 20% tax bracket was getting a deduction for charitable contributions and now does not, it, in effect, increases the cost of giving to the charity by 20%.  Tax deductions for these items were designed to encourage people to give to the charity; it works the other way also.  When the deduction is removed, the encouragement is gone.  

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4 minutes ago, regentrude said:

Yes. But most people do not donate $24k or even close.

Okay, the light bulb just went off after my cup of coffee. Using a married couple as an example:

--In 2017 people were donating above the standard deduction of $12,700 and itemizing their deductions to get the tax benefit

--In 2018 they are now giving less than that or giving nothing at all and just taking the standard $24k deduction because they don't have to donate to get that benefit

Is that what's happening?

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It's really going to vary. I thought for sure we'd owe, but we did fine. But my income is on the low side, and I have two in college. Nothing has changed on the American Opportunity credit other than a slight adjustment to the level where you can't claim it. Or so I was told.

Mine go to a professional. At some point I may go back to doing my own taxes, but for various reasons I need the professional signature and backing. Every year I've gone to her, she finds something I would have never considered. 

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50 minutes ago, Frances said:

If your state allows this, ours doesn’t, then it’s like giving all charitable contributions every other year, it can take your itemized deductions beyond the $24k standard. However, it also won’t work for us because there is still the $10k SALT (state and local taxes) limit. We are already over $10k with one years worth of property taxes and state income taxes. We need that limit raised.

 

Okay thanks. That makes sense. Yes our property taxes are well over 10k a year, so it wouldn’t help us. We don’t have state income tax. So that was my understanding from our CPA- that of one of the things causing us to have to pay more this year was that property tax issue. Guess it is what it is. 

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It's entirely possible that this is a TurboTax issue. I've had trouble with them before claiming that I owed $$$$ in taxes when really, I was getting a refund. There's some glitch in their program somewhere.

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13 minutes ago, EmseB said:

Okay, the light bulb just went off after my cup of coffee. Using a married couple as an example:

--In 2017 people were donating above the standard deduction of $12,700 and itemizing their deductions to get the tax benefit

--In 2018 they are now giving less than that or giving nothing at all and just taking the standard $24k deduction because they don't have to donate to get that benefit

Is that what's happening?

 

Itemization also has mortgage interest, etc. 

So say a married couple pays $12,000 in mortgage interest and real estate taxes. They would have to only find $700 more to start itemizing and get the credit for the mortgage and everything else.  

Now, there's really no "benefit" to donating that $700; they would need to donate $12,000 to get any benefit if their mortgage and real estate taxes stay a similar amount.

I don't think most people think too much of the tax implications of donations - they just knew that they get a tax writeoff (I doubt many middle class people really had a clue how much donating would save them in taxes). Now they know there is no "benefit" so they're probably less likely to give. 

Edited by beckyjo
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I'm nervous now.  I didn't give our taxes a second thought, but this thread compelled me to call my CPA just now for an early appointment.  I usually wait until April to go. 

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Attolia, my quote function isn’t working, so I’m giving up. 

Your situation, unfortunately, isn’t odd. We have three kids under 17, and stillnour taxes went up. I expected it because I do taxes professionally, but it’s still painful. I’ll give you a quick rundown of what happened to your tax situation based on what I THINK I’ve gleaned from your posts. 

Last year, you itemized to save more than the $12,700 standard deduction, but we’ll use the standard for simple math. And you had 6 exemptions for a family of 6. That’s a total of $24,300 (4050 per person). JUST the standard deduction plus exemptions took $37,000 off of your taxable income last year. So, if you earned 80,000, you only paid taxes on 53,000 of that money. And you itemized, which means you actually paid taxes on even less, because to itemize, you had deductions higher than 12,700 (the standard deduction). Then, you got to take $3000 of your actual taxes for the child tax credit.

The day the new tax law went into effect, your taxable income (assuming you did not itemize last year) went UP by 13,000 dollars (37,000-24,000 which is the new standard deduction). No exemptions equals a big tax hit for families. You can’t itemize this year because the standard deduction went up. Then, you earned $6000 more. Do, now your taxable income increased by 13,000+6000=19,000. 

All of this is without even taking into effect the loss of those itemized deductions. If you were itemizing another 5000 dollars, your taxable income just went up by 19,000+5000=24,0000. 

Following me? So, back to our initial number of a 19,000 increase in taxable income. If that’s in the 22% tax bracket, that’s $4180 more in taxes this year. Your increased child tax credit cabt touch that (I think it went up $1000 for you? But I can’t remember). 

And, if your taxable income went up 24,000 because you had been itemizing 5000 extra (for 19,7000 in itemized deductions) and you are in the 22%, now your taxes went up $5280. 

Then....we get to talk about the state tax hit. Most states tax based on your taxable income. Yours went up at least 19,000 this year, which means you are paying state taxes on another 19,000 dollars. And, there’s still Self Employment tax to pay (15.3% to cover the payroll taxes on your SE income). 

It’s a mess for many filers. I’m sorry. 

Edited by BooksandBoys
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It looks like we are getting the standard deduction this year even though last year our total itemized were more than $37K and this year's has to be more.  I can't profess to understand how this works, but TT is saying the $24K standard deduction is better for us.  

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Just now, cintinative said:

It looks like we are getting the standard deduction this year even though last year our total itemized were more than $37K and this year's has to be more.  I can't profess to understand how this works, but TT is saying the $24K standard deduction is better for us.  

You may want to run that through another software. If you itemized 37,000 last year and have more this year, it doesn’t make sense to use the standard of 24,000. TurboTax does have bugs occasionally. 

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1 hour ago, EmseB said:

 

Wait..what? People are donating to causes solely to get the tax benefit? That seems...not really charitable, I guess. I am not trying to be sanctimonious, but it would never occur to me to stop giving money to people in need because I wasn't getting a break on my taxes for it. Really???

And I can't figure out how this works. If we gave, say, $15k to charity and itemized in 2017, our standard deduction goes up to $24k in 2018 and we don't have to itemize, correct? So our taxable income is lower and we have to provide less documentation? Why would that cost us more or reduce our giving or make it beneficial to give $30k every other year instead?

I know someone is going to point out I have this all wrong, so be gentle, please.

We've never had an income or tax amount that was high enough for us to benefit from tax deductions, but that didn't prevent us from giving small donations to organizations whose mission we support. I imagine it will make a difference for people who donate large amounts to offset high taxes though.

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2 hours ago, regentrude said:

That tax reform was pushed through without careful debate and analysis of consequences; there will be many unintended ones. Non-profits are already suffering because people won't donate if they can't deduct it from their taxes.

 

Which is too bad isn't it? They didn't really believe in the mission, they were just gaming the system for their own benefit.  YEs, I'm sure nonprofits liked the money. But I'm not sure its an entirely bad thing to point out where the givers' heart really was.

 

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21 minutes ago, cintinative said:

It looks like we are getting the standard deduction this year even though last year our total itemized were more than $37K and this year's has to be more.  I can't profess to understand how this works, but TT is saying the $24K standard deduction is better for us.  

Are you in a high tax state?  State and property taxes are capped at $10K so if you were deducting $25K in the category, you would automatically lose $15K of deductions even if nothing else changed.

18 minutes ago, BooksandBoys said:

You may want to run that through another software. If you itemized 37,000 last year and have more this year, it doesn’t make sense to use the standard of 24,000. TurboTax does have bugs occasionally. 

I was thinking it was do to the SALT limitations but you are right it never hurts to double check numbers in another program if things seem really wonky.

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13 minutes ago, vonfirmath said:

 

Which is too bad isn't it? They didn't really believe in the mission, they were just gaming the system for their own benefit.  YEs, I'm sure nonprofits liked the money. But I'm not sure its an entirely bad thing to point out where the givers' heart really was.

 

This does not necessarily have anything to do with where the giver's heart is.  Suppose I have $100,000 in income and a 25% tax rate.  If I want to give everything to what I think is a great charity, I can give the charity $75,000 after I pay my taxes.  That is all I have to give the charity.  If, however, I can deduct the amount I give to charity from my income and THEN pay taxes on my adjusted income, I could give $100,000 to the charity, have $0 in adjusted income and pay $0 in taxes.

Of course, this is an extreme example, to make the math easier and more straightforward, but the basic principle is the same.  If I pay $1 in taxes it is $1 I do not have to spend elsewhere--even if it is a charity that I strongly believe in.  

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14 hours ago, Jean in Newcastle said:

oops, old quote - ignore this one!

 

1 hour ago, Æthelthryth the Texan said:

Okay thanks. That makes sense. Yes our property taxes are well over 10k a year, so it wouldn’t help us. We don’t have state income tax. So that was my understanding from our CPA- that of one of the things causing us to have to pay more this year was that property tax issue. Guess it is what it is. 

I think that is the issue for a lot of people. We are in a low tax area, comparitively and Florida has a homestead exemption, so you pay very little property tax on your primary residence (versus income property that you rent out, or a vacation home - lots and lots of both of those in the state to balance out the homestead exemption). So I think my total property taxes last year, with that exemption, were about 1K. AND we don't have a state income tax. So SALT didn't hurt us, but it is killing a lot of people in high property tax areas. I don't think that got near enough coverage when the bill be being rushed through. 

42 minutes ago, BooksandBoys said:

You may want to run that through another software. If you itemized 37,000 last year and have more this year, it doesn’t make sense to use the standard of 24,000. TurboTax does have bugs occasionally. 

Sometimes it will say "most people do better with ________" but that doesn't mean YOU will do better. Run it both ways. 

26 minutes ago, vonfirmath said:

 

Which is too bad isn't it? They didn't really believe in the mission, they were just gaming the system for their own benefit.  YEs, I'm sure nonprofits liked the money. But I'm not sure its an entirely bad thing to point out where the givers' heart really was.

 

I am 100 percent sure that those benefiting from the charitable giving don't give a rat's patootie where the giver's heart is, just how much they give. Cash from bad people spends as well as cash from good people. 

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I thought that the charitable deduction baked into our tax code was the main reason that the U.S gives far more than other countries re charitable contributions -- not that we have more generous hearts than the rest of the world. 

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1 hour ago, mommyoffive said:

 

Oh I think a lot of people do.    I think it also makes people give more than if there was no benefit to it. 

Since the tax benefit is only a fraction of the donation, nobody in their right mind donates just to get the tax benefit.

It is likely that people who have a tight budget might reduce their charitable giving if there is less tax benefit, but usually people on a tight budget are not large donors and many of them don't itemize anyway.

Myself and most people I know do not determine donation amounts based on tax benefit.

PS there has always been a phase out of itemized deductions (and credits) at higher income levels.  So I'm used to the idea of not getting much tax bang for my charitable buck.

I have never qualified for the child tax credits etc in prior years.  Not sure about this year.  Due to the type of income I earn, a quick check last year suggested my taxes will be about the same or a little more under the new tax act.  However, I am not the type of person it was meant to help.

Most people do benefit under the tax act.  Some don't.

I am not sure I agree with the idea that there should be tax exemptions for parents of older teens and young adults.  Most people of that age should be able to work and contribute to a household.  The tax difference for one 17yo whose parents' marginal rate is 22% is $891 or $17 per week.  For families earning less than $77k it is a 12% rate, so only $486 or $9 per week.  But if he's in college, he gets a credit for that.

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1 hour ago, regentrude said:

The effect is twofold.

1. People are always more likely to donate if they are getting something in return. Otherwise, organizations wouldn't run fundraiser dinners, charity 5ks, trivia nights, send stupid trinkets in the mail... it's psychology.

2. this will be the smaller effect: People  can afford to donate $100, but know they will get back $20 in taxes, so they can actually donate $120.

ETA: "Charitable giving" does not automatically translate into "giving to people in need". A lot of charitable giving, for example, funds the arts. Where you don't see a starving child or homeless mom - the need is more subtle, and yes, people absolutely stop donating to orchestras, outreach programs, women's cultural centers

Actually, many people, myself included, are much less likely to donate if they are "getting something in return."  I want my donation dollars to help the people supposedly targeted by the charity.  I haven't participated in / donated to any charity that does those ridiculous foo foo dinners or "walks" in decades.

I agree with the "people can donate more" point #2, as far as it goes, but most people with high enough income to donate much have their itemized deductions phasing out anyway.  I know I don't (and never did) decide on a donation amount based on tax effects.  I certainly am not alone.

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 I thought the charitable deductions were our (US) way of acting out the giving should be local/philanthropic instead of from the federal government philosophy. So, instead of paying the taxes so the government could provide, you provide it yourself.  The tax cut was a way for those folks who didn't want the government in the charity business to do it themselves and get credit for that (so, in a way, they aren't part of the government providing it.)  I may be way off on this, but in that scope, giving is giving b/c it's "the right thing to do" as much as from your heart (think late 19th century philanthropy.)  So, that part going away kind of confuses me.

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52 minutes ago, vonfirmath said:

Which is too bad isn't it? They didn't really believe in the mission, they were just gaming the system for their own benefit.  YEs, I'm sure nonprofits liked the money. But I'm not sure its an entirely bad thing to point out where the givers' heart really was.

 

Who cares where their heart is?

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1 hour ago, BooksandBoys said:

 

Then....we get to talk about the state tax hit. Most states tax based on your taxable income. Yours went up at least 19,000 this year, which means you are paying state taxes on another 19,000 dollars. And, there’s still Self Employment tax to pay (15.3% to cover the payroll taxes on your SE income). 

It’s a mess for many filers. I’m sorry. 

I just wanted to point out that at least many states tax based on your AGI, not taxable income.  So that would be before all the changes involving personal exemptions / itemized deductions.  Pretty sure the same goes for self-employment tax.

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1 hour ago, BooksandBoys said:

 

Following me? So, back to our initial number of a 19,000 increase in taxable income. If that’s in the 22% tax bracket, that’s $4180 more in taxes this year. Your increased child tax credit cabt touch that (I think it went up $1000 for you? But I can’t remember). 

And, if your taxable income went up 24,000 because you had been itemizing 5000 extra (for 19,7000 in itemized deductions) and you are in the 22%, now your taxes went up $5280. 

 

I assume this is without taking into account the reduced tax rate.  After applying the tax rate reduction, the "increased tax" would be less.

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1 hour ago, cintinative said:

It looks like we are getting the standard deduction this year even though last year our total itemized were more than $37K and this year's has to be more.  I can't profess to understand how this works, but TT is saying the $24K standard deduction is better for us.  

Could it be because of income phase-outs?  I don't recall how those work for itemized deductions vs. standard deduction ....

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6 minutes ago, Tanaqui said:

 

Who cares where their heart is?

This.

And frankly, it shouldn't be that surprising in a country based entirely on the concept of rugged individualism, pull yourselves of by your bootstraps, and "I am not my brother's keeper", that this is the case.  American ideals have been, by in large, individually based, instead of communally based so not donating to charity unless there is a personal benefit is totally in keeping with the national psyche whether we like to admit it.

That said, math is math is math. Without the deduction, it simply does reduce what a person may be able to give since a lot of charitable giving occurs in the last quarter to reduce tax bill, and when refunds come out in the mid-winter/spring. Reduced refund, reduced amount of money people can give.

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OK, based on all the cynical comments above about American "charity," all the charities should have gone out of business in 2018.

Time will tell how much difference it makes in actual charitable donations received by charities.  They all file fiscal reports annually.

I would note that people can still itemize charitable deductions if they give a lot.

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6 minutes ago, Faith-manor said:

That said, math is math is math. Without the deduction, it simply does reduce what a person may be able to give since a lot of charitable giving occurs in the last quarter to reduce tax bill, and when refunds come out in the mid-winter/spring. Reduced refund, reduced amount of money people can give.

But of the overall tax bill is less, as it is for most modest-income filers, people actually have more disposable cash to give if they so desire.

I would also point out that on average people are earning more as well as paying less tax.  To the extent disposable cash determines charitable giving, it should go up, not down.

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I started a new thread because the discrepancy with TT vs on my own was huge.  If you know taxes, please peek and reply.  I seriously need help.  This has taken so much time and I don't know what I am doing.  blah

Edited by Attolia
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28 minutes ago, freesia said:

 I thought the charitable deductions were our (US) way of acting out the giving should be local/philanthropic instead of from the federal government philosophy. So, instead of paying the taxes so the government could provide, you provide it yourself.  The tax cut was a way for those folks who didn't want the government in the charity business to do it themselves and get credit for that (so, in a way, they aren't part of the government providing it.)  I may be way off on this, but in that scope, giving is giving b/c it's "the right thing to do" as much as from your heart (think late 19th century philanthropy.)  So, that part going away kind of confuses me.

 

I think this misses the point of the deduction.

The point of a charitable giving deduction is that the giver pays less taxes based on what they've given.  Services provided by the government are the same, meaning that the government (that is, all of us collectively) are essentially footing the bill for the deduction and therefore spending money on the charity.  

This change actually gets the government entirely out of charitable giving, meaning that no public money indirectly supports causes that are not clearly government-funded above-board.

I don't care about why people donate; it's great that they do, and if there's enough demand for the need - that is to say, if people believe enough in orchestras and women's shelters and no-kill shelters and etc. - they'll keep giving.  It's just that the government isn't giving anymore, and that's fine with me.  

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45 minutes ago, SeaConquest said:

I thought that the charitable deduction baked into our tax code was the main reason that the U.S gives far more than other countries re charitable contributions -- not that we have more generous hearts than the rest of the world. 

 

Very likely.  The charitable deduction tax break was created to incentivize giving.

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1 hour ago, vonfirmath said:

 

Which is too bad isn't it? They didn't really believe in the mission, they were just gaming the system for their own benefit.  YEs, I'm sure nonprofits liked the money. But I'm not sure its an entirely bad thing to point out where the givers' heart really was.

 

The money spends the same. Nonprofits generally don’t care why the person is giving the money. 

ETA: occasionally a nonprofit will refuse or return a donation if they think the money was obtained through unethical means or if it comes from a source that is opposed to their cause. However, that is rare. They don’t care if person A is giving because they support the cause or if they are giving for the tax benefit. 

Edited by TechWife
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1 hour ago, SKL said:
3 hours ago, mommyoffive said:

it to it. 

Since the tax benefit is only a fraction of the donation, nobody in their right mind donates just to

 

1 hour ago, SKL said:

Since the tax benefit is only a fraction of the donation, nobody in their right mind donates just to get the tax benefit.

It is likely that people who have a tight budget might reduce their charitable giving if there is less tax benefit, but usually people on a tight budget are not large donors and many of them don't itemize anyway.

Myself and most people I know do not determine donation amounts based on tax benefit.

PS there has always been a phase out of itemized deductions (and credits) at higher income levels.  So I'm used to the idea of not getting much tax bang for my charitable buck.

I have never qualified for the child tax credits etc in prior years.  Not sure about this year.  Due to the type of income I earn, a quick check last year suggested my taxes will be about the same or a little more under the new tax act.  However, I am not the type of person it was meant to help.

Most people do benefit under the tax act.  Some don't.

I am not sure I agree with the idea that there should be tax exemptions for parents of older teens and young adults.  Most people of that age should be able to work and contribute to a household.  The tax difference for one 17yo whose parents' marginal rate is 22% is $891 or $17 per week.  For families earning less than $77k it is a 12% rate, so only $486 or $9 per week.  But if he's in college, he gets a credit for that.

 

I think people do though.  I think most people don't understand taxes fully so they don't really figure out how much they are getting out of it.   I bet if you asked most people in the country, they would think it was for the whole donation. 

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47 minutes ago, Attolia said:

I started a new thread because the discrepancy with TT vs on my own was huge.  If you know taxes, please peek and reply.  I seriously need help.  This has taken so much time and I don't know what I am doing.  blah

 

Why don't you go to a CPA?  It might be worth it this year. 

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4 minutes ago, mommyoffive said:

 

 

I think people do though.  I think most people don't understand taxes fully so they don't really figure out how much they are getting out of it.   I bet if you asked most people in the country, they would think it was for the whole donation. 

I disagree.  The majority of people with enough income and tax understanding to file an itemized deduction worksheet do understand that deductions do not reduce tax dollar for dollar.

Maybe lots of people who do NOT take this deduction think it's dollar for dollar for those greedy rich people who do take it.  But the charities themselves are not affected by that ignorance.

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1 minute ago, SKL said:

I disagree.  The majority of people with enough income and tax understanding to file an itemized deduction worksheet do understand that deductions do not reduce tax dollar for dollar.

Maybe lots of people who do NOT take this deduction think it's dollar for dollar for those greedy rich people who do take it.  But the charities themselves are not affected by that ignorance.

 

I think there are lots of people who take deductions without really understanding them. 

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2 minutes ago, mommyoffive said:

 

I think there are lots of people who take deductions without really understanding them. 

I still don't agree with your premise, but ... if it is true that some people are donating to charity because they mistakenly think their tax liability will go down dollar-for-dollar, then the charity has no business getting that money in the first place.

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43 minutes ago, SKL said:

I still don't agree with your premise, but ... if it is true that some people are donating to charity because they mistakenly think their tax liability will go down dollar-for-dollar, then the charity has no business getting that money in the first place.

 

What does the charity have to do with the motives or understanding of the giver?  

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I think that very, very few large charitable donations are 100% out of pure motivation.  If they were, they would not be advertised.  And yet both companies and individuals routinely advertise (or publicize) their large donations.  So I don't think it is as simple as either/or.  Most of the time, the entity or person believes in the cause AND likes the tax benefits, and in some cases the publicity.

Edited by goldberry
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11 minutes ago, goldberry said:

I think that very, very few large charitable donations are 100% out of pure motivation.  If they were, they would not be advertised.  And yet both companies and individuals routinely advertise (or publicize) their large donations.  So I don't think it is as simple as either/or.  Most of the time, the entity or person believes in the cause AND likes the tax benefits, and in some cases the publicity.

 

Reminds me of that Friends episode where Phoebe is trying to find an act of generosity that doesn't make her happy in some way.  

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Less, yes, but not by a huge amount. I did forget to show the comparison of the lower tax rate, but when you are talking about higher incomes, the lower tax rate doesn’t fully compensate for the higher taxable income. For example, if her taxable income is 18,000 higher and that full amount is in the 22% (new rate) bracket, but before, they never reached that higher bracket because their taxable income was below the (then 25%) threshold, we’re still talking a significant tax increase.

Example: 

Say they earned 120,000. Last year, with itemized deductions of say 5000 more than the standard deduction, plus exemptions, they could reduce their taxable income to 78,000, which is almost completely in last years 15% tax bracket, just a touch was taxed at 25% and brings their tax to $10,977 given 120,000 Last Year. 

This year, they make 120,000, can’t itemize, no exemptions. Now, their taxable income is 96,000, which puts them solidly in the 22% tax bracket (yes, tax rate went down from 25%), but because there is a large amount being taxed at that 22% unlike last year when only a couple thousand was at 25%, it’s still a big hit), this year, they owe $13,999. That’s about $3000 more. Add in the SE income of 6000, (5541 of it actually taxed due to SE deduction) now taxed at the 22% rate plus the SE tax of 15.3%...that’s another 2000 and change from the SE income.

Sorry that I forgot to spell that all out. And I have no info about her income, of course. I’m just playing with numbers that can show how a big tax increase can happen.

Also, I know you know this. I was just spelling out how the tax rate cut doesn’t fully compensate for the loss of exemptions/deductions for other curious minds. 

Edited by BooksandBoys
Ugh. Quote function is wonky. That was supposed to quote SKL pointing out that tax RATES went down so the increase in taxes was less than I originally described. :-)
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On 1/30/2019 at 10:55 AM, SKL said:

I just wanted to point out that at least many states tax based on your AGI, not taxable income.  So that would be before all the changes involving personal exemptions / itemized deductions.  Pretty sure the same goes for self-employment tax.

Also, 

Edited by Frances

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1 hour ago, SKL said:

I still don't agree with your premise, but ... if it is true that some people are donating to charity because they mistakenly think their tax liability will go down dollar-for-dollar, then the charity has no business getting that money in the first place.

I don’t think they think it will go down dollar for dollar. But at least for those who itemized in the past, I think most understood at some basic level that more donations meant a lower tax bill.

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1 hour ago, SKL said:

I disagree.  The majority of people with enough income and tax understanding to file an itemized deduction worksheet do understand that deductions do not reduce tax dollar for dollar.

Maybe lots of people who do NOT take this deduction think it's dollar for dollar for those greedy rich people who do take it.  But the charities themselves are not affected by that ignorance.

Most people do not complete an itemized deduction worksheet. It’s either being done by software or a preparer. 

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4 hours ago, SKL said:

OK, based on all the cynical comments above about American "charity," all the charities should have gone out of business in 2018.

Time will tell how much difference it makes in actual charitable donations received by charities.  They all file fiscal reports annually.

I would note that people can still itemize charitable deductions if they give a lot.

I think conservative predictions were around a 10% reduction in charitable giving. It might also take people time to figure everything out for their own personal situation and make future adjustments accordingly. All of the behaviorist effects of the tax bill will not be seen in the first year.

Edited by Frances

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On 1/30/2019 at 11:21 AM, moonflower said:

 

I think this misses the point of the deduction.

The point of a charitable giving deduction is that the giver pays less taxes based on what they've given.  Services provided by the government are the same, meaning that the government (that is, all of us collectively) are essentially footing the bill for the deduction and therefore spending money on the charity.  

This change actually gets the government entirely out of charitable giving, meaning that no public money indirectly supports causes that are not clearly government-funded above-board.

I don't care about why people donate; it's great that they do, and if there's enough demand for the need - that is to say, if people believe enough in orchestras and women's shelters and no-kill shelters and etc. - they'll keep giving.  It's just that the government isn't giving anymore, and that's fine with me.  

No

Edited by Frances
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That's true, Frances.  I wish they would just get rid of the deduction (and, for that matter, most deductions) entirely.  Gotta keep loopholes for large corporations to avoid paying taxes, though!

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54 minutes ago, moonflower said:

That's true, Frances.  I wish they would just get rid of the deduction (and, for that matter, most deductions) entirely.  Gotta keep loopholes for large corporations to avoid paying taxes, though!

Giving to charity and paying state and local taxes are terrible behaviors, I know.

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they're fine behaviors, but they're not things the government should need to encourage you to do or to subsidize.

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