How do the rich use charities to minimize their tax?

Question

You hear a lot about how “the rich” are using charities to effectively reduce their tax to minimal amounts, among other methods.
On the face of it without digging, it obviously makes people angry and detest the rich. But scratching beneath the surface, I’m not quite sure how exactly they would achieve this? In order to claim the tax back from money donated, you still have to… donate money? Which would still equal more than the money claimed back from tax.

So unless they are actually doing something illegal and funneling money through a charity, claiming tax, and then using that money from the charity to fund purchases not related to the charities mission, how exactly is it benefiting the donor (financially)?

In: Economics

Answer 1

One doesnt make money on charity tax returns. having a charity in your business structure is a place to park and spend money. charities only have to use 10% of donations to the cause. and I’m sure they get taxed less.

if you made a million dollars. instead losing 50 percent of it. You can donate it to a charity you own. Use ten percent for a good cause and appropriate funds you need through the charity. Rinse and repeat. I’m sure there is other benefits as well.