Why do americans donate really expensive items to get a tax writeoff?

Question

I dont know much about tax in america, but was watching a travel programme, where the presenter visited a shop where rich people donated precous items worth thousands of dollars to get a tax writeoff.

Surely the tax return will not be as much as the item donated?
So what am I missing?

Answer 1

Tax returns wont be as much as the item donated, but what it does is it brings down the tax that they would have had to pay. The IRS gives everyone a standard deduction that they could use to help bring down this tax, but when its not enough they use their itemized deduction. This is for people that have mortgage interest, property tax, medical bill in excess of 7.5% of their adjusted gross income, business expenses, casualty losses and some other things. They try to get their itemized deductions over their standard deduction. The items donated must have been donated to a qualified organization, it cant be to a specific person. They can take they fair market value of the item or items they donated. So when they donate really expensive things it has a large fair market value it raises their itemized deductions. There in fact it would lower their tax that they would have to pay to the IRS.

Answer 2

first it may not be wroth what is stated may not be able to sell a white elephant
and there is prestige from giving and giving big.
good will and beat the Jones combined.
not paying tax is cool for republicans and now dems too. sad for america.
sometimes have to write off something big to avoid higher tax bracket. so though only get part save big as lower tax rate over all.
theres a lot of last minute donating at end of tax year to get income below the line.
corporations have different due dates than individuals..so not necessarily in DEC/fro April filing.
some people donate because it is Good AND RIGHT
Americans still give less than most i hear.

Answer 3

What you are missing is how much they paid to acquire the object in the first place. Let's try a simple example- let's say I own a pizza company. I sell pizzas for $10 each. If my company is big enough, I can buy my raw materials in bulk quantitites, reducing the material cost to maybe 25 cents per pizza. If my cook knows his stuff, he can whip up a pizza in 2-3 minutes, so the personnel cost is minimal. If I donate the pizza for the write-off, it costs even less because I don't have to take into account the cost of the retail space. So for maybe a dollar in actual costs, I can take a $10 write-off.

Answer 4

it is usually when they want to do donate something anyway.

Say you bought a painting for $10k 10 years ago and it appraises today for $100k if you were to sell it today you can get $80k.

So if you sold it you would pay tax on $80k-$10k=$70k on which would be about $25k leaving $55k for you or the charity.

now if you donated the painting you get a tax deduction of $100k whcih equals $35k and the charity recieves $80k from the sale

Answer 5

cause they can get a big write off