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

So, the trick is to donate money to a charity that you still effectively control.

Yes, it isn’t a zero tax hack for everything, but if you have personal goals that can be accomplished via a charity, routing money though one is a solid way to avoid being taxed on that amount.