Effect of Benefit To Donor
Contributions to charitable organizations are deductible to the donor, unless the donee organization uses any of its net earnings to benefit a private shareholder, or if it attempts to in any way influence political campaigns or legislation.
A contribution to a charitable organization need not be fully a "gift" in the statutory sense of the word to be deductible to the donor. The donor's allowable deduction will be reduced, however, by the amount of the "substantial benefit" conferred upon them as a result of their contribution.
To illustrate, suppose that the American Cancer Society is hosting a formal dance as a fund-raiser (the ACS is a certified charitable organization). Further suppose that the fair market value of a ticket to the dance is 75 USD, and that the donor pays 375 USD to purchase a ticket. The donor may claim only a 300 USD deduction, because the amount contributed (375 USD) is reduced by the amount of the benefit that he received (75 USD, the fair market value of the ticket). This holds true even if the donor does not actually attend the dance.
The taxable income of the donor is reduced by 300 USD. If the donor's income was in the 35% income tax bracket both before and after the deduction, the donor's tax liability (amount of taxes owed to the government) is reduced by 105 USD.
Read more about this topic: Charitable Contribution Deductions In The United States
Famous quotes containing the words effect of, effect and/or benefit:
“The law before us, my lords, seems to be the effect of that practice of which it is intended likewise to be the cause, and to be dictated by the liquor of which it so effectually promotes the use; for surely it never before was conceived by any man entrusted with the administration of public affairs, to raise taxes by the destruction of the people.”
—Philip Dormer Stanhope, 4th Earl Chesterfield (1694–1773)
“Airplanes are invariably scheduled to depart at such times as 7:54, 9:21 or 11:37. This extreme specificity has the effect on the novice of instilling in him the twin beliefs that he will be arriving at 10:08, 1:43 or 4:22, and that he should get to the airport on time. These beliefs are not only erroneous but actually unhealthy.”
—Fran Lebowitz (b. 1950)
“I have never taken any exercise, except sleeping and resting, and I never intend to take any. Exercise is loathsome. And it cannot be any benefit when you are tired; and I was always tired.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)