Donate your taxes to get a deduction?

Is this being discussed anywhere in these forums?

If so, point me to it and I’ll delete this thread. If not, shall we discuss?


It reminds me when people donated to parochial schools in exchange to getting tuition deducted. This was called tax fraud in the past. Now a whole state is legalizing this practice.


I guess I would want to know more about this and how it would work. On the surface, it seems like I would still be taking money out of another pocket for what???

The basic idea is if a tax payer has state income tax liability of $50k, instead of paying this amount as tax, he donates that amount to the state. For IRS purpose, this is donation and tax deductible. While at the same time, due to this donation, FTB wrote off this $50K from that person’s liability. Now this tax payer paid off his state tax through the donation. This essentially nullifies a major part of SALT limit in the new tax code.

In the past, IRS treated this kind of practice as fraud. Don’t know how legal it will be if a large state legalizes it.

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A coworker once told me the tuition in private school is not what’s listed. They expect parents to make “donations”. It’s not explicit though.

If enough big states like CA and NY get behind it this thing will get to the Supreme Court. It will take many years and by then we will likely have democratic majorities in both chambers.

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I think it’d be a disaster. Most people have no clue how much they pay in state income taxes, since it’s taken from their payroll before they get it. If people have to write a check for the taxes, then they realize how much they are really paying. They’ll start to question the size of the check and if it’s worth it.

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Manch, you are correct–the tuition is calculated and then parents are asked to contribute more with the idea that if you can afford it, at least you didn’t have to pay the pretax amount. But there’s not supposed to be any requirement (although I’ve heard rumors of schools “expecting” donations from wealthy families in exchange for the promise of future siblings being admitted). But for families who can’t afford a donation, the school shouldn’t be able to kick them out if they don’t. And for some families, they get fin-aid that someone else donated as a tax-deductible donation.

The example of the parochial school writing off tuition though is definitely not acceptable because you’re not supposed to directly receive anything for the donation, and donations cannot go directly to a person.

So for example, you may know a homeless family that desperately needs donations, and you want to help. You can donate money to a homeless shelter or other charity, BUT that money cannot be designated to that family if you want the tax-deduction. In the end, the charity may go ahead and use it for that family, but your donation can’t be designated. So you also can’t, as a parent or grandparent or friend, pay tuition for a kid and have it be tax-deductible.

So I see your point here, but the government isn’t a 501c3 org anyways is it? So how could that even work on a federal level? CA creates a 501c3 off-shoot and you donate??? Seems weird. I could see your (collective) points that this could very well end up in court if a state tried it.

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Agreed–that’s quite a check to write. And you also have to have that on reserve in order to write the check and then get the refund.

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Most people know how much they earn, and how much they will pay in taxes, if any. Wages don’t change very often for you to not know your contributions or your deductions.

Anyway, stop being negative. Anything to stop our hard earned money from going to feed other states is an OK from me.

Worry about yourself first, state second, and federal government last.

buyinghouse, we’re not trying to be negative, I just want to know people’s opinion on this. The loss of tax deduction is really significant and affect housing prices, and that’s why we’re here–to discuss financial stuff.

I take anything against the government as a plus. Weird I say that, but as we have seen lately, for a buck some people got too quiet about this government breaking anything and everything for the sake of those who don’t need breaks. Now, most cheer it, and that’s a mind boggling event to me.

You won’t get a straight answer from those posters that are always against your type of concerns. For them, everything is rosy. They are cheerleaders of the disaster in the white house.

You are in the delicate situation where any increase on prices will hurt you. So, while this tax reform can be negative for some people, it may be positive for others, including yourself.

Well, we’ll know pretty soon when Californians start to file their taxes.

No one here thinks home prices will be lower a year from now due to the tax law changes.

Unfortunately, we’re going to get hit hard on the lack of state tax deduction even without a house.

But I agree with you–less $$ in the pockets of the gov is better.

I think it’s ashame that you can’t get a straight non-itemized deduction (is that called line item?) for 501c3 donations. I’d rather donate $$$$ to my public schools myself than hope they trickle down through the fingers of the CA legislators.

@Terri How do you figure? You’ll get the increased standard deduction plus the child credit. You should come out ahead, since before you probably didn’t get the child tax credit. Now you get $2,000 credit per kid as long so your income is below $400k. It used to be eliminated if household income was over $110K/yr.

Now you get $24K standard deduction plus $6k credit for 3 kids.

Start talking to your tax person so you can anticipate your loss or your gain.

If you have small business, if you have a RE, life insurance, P&C license, you can end up the year with “losses”. So many things you can do to alleviate the pain.

Get incorporated, at our office, we are going to create a corporation so we can basically come up losing every year :rofl:

Ok. Fair enough. I guess I don’t actually know. Since we itemize, I figured that the loss of tax-deduction would be pretty significant.

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Don’t believe the hype! It pays to do your own research. My coworker thought he was screwed, but he’s coming out ahead.

I don’t believe the hype–that why I think I’m going to come out behind.

But I’ll find out next year one way or another.

This year is its own mess. :frowning:

The judgement day will be the day you do your taxes. Don’t believe people deflecting on an issue that most economists say is a travesty.

You want to save lots of $ on taxes? Open a corp, I will help you to put anything and everything expenses in it.

I can tell you how you can “host a party” equivalent to leasing an entire hotel room anywhere and claim it as expense without the IRS questioning it. :wink:

You want a trust? That too! The one not even the Russians can get into. :smile:

We are going to have the best year ever at our office. Lots and lots of people asking us for corps and IULs.

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So question:

If your minor child decides to work over the summer, can he have his own tax-return assessed at his own low tax-rate while you still declare him as a dependent? Or do his taxes have to be paid at your top rate to take the credit?