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
The IRS is well aware of all of these scams. Private foundations are strictly prohibited from doing things which directly benefit donors. Donors get to attend fancy dress galas etc, but [rich person] could go out for an expensive dinner for a lot less. Donating to legitimate charities let’s rich people choose who their money benefits while paying taxes does not, but the donations just reduce the amount of income they have to pay taxes on it doesn’t directly reduce their tax liability.
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