How is it possible to give to charity “for the tax write offs”? I see that you don’t pay 30~40% tax on the amount you donated, but you no longer have 100% of the amount so surely you’re worse off.
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The idea behind it is you give away things that weren’t actually worth money to you.
For example, many rich people donate cars or boats to charity. To them this isn’t “losing” money because it often happens shortly before they buy a new car or new boat. They’re rich, so they don’t really care so much that they didn’t get money for *selling* the car/boat.
There’s also a more complicated bit. Rich people can play fast and loose with their income. For example, you hear about CEOs “reducing their salary to a dollar” sometimes. Fun fact: if your salary is $1, that’s what you report to the IRS and that’s what you pay taxes on. The reason the IRS lets this slide is it’s assumed the CEO is going to sell some stock or other assets *instead* of making a salary, and they still have to pay a tax called “capital gains” on that sale.
So donating a lot to charity can allow a rich person to either take some more income or sell some other assets without having to pay taxes on it because they “pay” the taxes by donating the thing. If it’s a thing they didn’t really care about having anyway, they haven’t “lost” anything.
It’s also true that the value can be a sliding scale. Not all donatable things go down in value. If I buy a thing for $100,000, then auction it off for $300,000 and donate that money to charity, I created $200,000 of tax deductions for doing almost nothing. If I had sold that thing without donating the money, I’d have had to pay MORE taxes. (This is a bit oversimplified, the rules for “selling” things for charity donation are very strict and rich people can afford the lawyers to help them do it properly.)
So rich people tend to invest in a lot of things like art or boats so they can hold on to them and use them as tax deductions when they need to liquidate other assets that are taxed.
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