I came across a person the other day, who suggested that anyone who lists charitable gifts on their taxes is not donating out of the goodness of their heart, but for the selfish benefit of receiving a tax deduction. Upon hearing those words I had a facepalm moment…
I guess they have a point, the deduction benefits probably do encourage charitable giving. I mean when was the last time you gave more than $500 to a business or organization that didn’t qualify for a deduction?
If you’re like me the answer is almost never.
Sure I give $20 here and there to a homeless person, or I might give $100 to a friend for a missions trip, but I honestly don’t think I’ve ever just walked down to my local coffee shop and been like; “Hey you guys do awesome work and I want to support the business, here’s $500.”
So yes, I guess most of us probably do only give substantial financial gifts to charities that allow us to deduct that gift from our tax obligation, but ultimately I have to disagree with the sentiment.
I might be wrong, but I’d bet most people who make charitable contributions do so because they want to help someone or something out, not because they’ll get a deduction.
It just doesn’t make financial sense.
If I’m in the 25% tax bracket and I give $10,000 to charity over the course of the year, my maximum benefit for making that contribution would be $2,500. Why the heck would I give someone $10,000, so I can save $2,500? It clearly would be to my benefit to never make the contribution, write Uncle Sam a check for an extra $2,500, and keep the remaining $7,500.
And that is exactly the point I want to make today.
Why do people get so pumped on tax deductions like they are best thing ever? I mean people were telling me to keep my student loans because I could deduct some of the interest on the loan.
They literally were trying to convince me to keep paying $2,000 a year in interest to Sallie Mae, so I didn’t have to send the government $500.
I bet some of you with mortgages have probably had similar garbage preached to you, “Don’t pay off the mortgage, you’ll lose the deduction.”
Don’t get me wrong. I love me some deductions. If you are eligible, take ’em. Just don’t do something stupid and give Person A $5,000 so you can avoid giving Person B $1,000… Unless of course you have so much freakin’ money you like wasting it, then by all means waste to your heart’s content.
Have you been told to keep a debt around longer than you wanted because of the tax deduction? Do you regularly give significant financial gifts to non-qualified businesses or organizations? Have you ever given a gift, purely for the tax benefit?