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July 21, 2004

Does the Charitable Deduction Have Impact?

Clayton Cramer notes

I discovered a few years ago, when I had a remarkably good year (thanks to Nokia's acquisition of my employer), that above about $130,000 gross income, you start losing your charitable deductions. A person who makes $10,000,000 a year, as near as I can tell, gets almost no more benefit on his taxes from giving $1,000,000 to charity than giving $5,000. He might well give the extra money, but it won't lower his federal income taxes more than a couple bucks. (Talk about a really stupid tax policy, if the goal is to encourage charitable giving.)

If this is true, which I'm skeptical of, then the charitable deduction doesn't exist for many (most?) of the people who would itemize donations. Charitable deductions do enter into the Alternative Minimum Tax, but I forget how, having only once been caught by AMT.

Posted by erasmuse at July 21, 2004 10:03 AM

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