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Adjusting Your Support Level
A new way of thinking about charitable contributions

by Fred Watt
September 28, 2011

Introduction (or skip the lecture and go right to the point)

With the advent of the Internet and the easy access to information that this unique medium provides, more and more people are learning how to conduct their own research, access information, and arrive at truths which previously seemed out of reach to them. As part and parcel of this new capability, folks are discovering that much of what has been presented to them over the years as "common knowledge" or "just the way things are" is in fact based more on widespread ignorance than it is on logic, evidence, practicality, science, or even law.

This is a Very Good Thing™ in my opinion. Social theories are no longer accepted at face value as if they were axiomatic. Statistics (and their interpretations) are now routinely challenged, along with the so-called "experts" who present them. Political candidates are no longer able to claim whatever they want when there are easily accessible public records to the contrary. Even the Theory of Evolution is now being challenged (and in many cases, rejected) due to the widespread exposure of more and more evidence supporting Intelligent Design. This wonderful accessibility to information has provided new and heightened credibility to the areas of alternative education (like homeschooling), alternative medicine, alternative energy, alternative news sources, even alternative housing.

In short, more people are gaining the capability and the confidence to take on the status quo and question the "prevailing wisdom" that has dominated our society for too long in far too many areas. In the process, many things which have heretofore been considered "obvious", "important", or "esteemed" are now being exposed as the distortions, the exaggerations and, in some cases, the outright fallacies that they are.

So what does this have to do with a homeschool baseball team? Well, with respect to the broad-ranging, world-shaping, genuinely-important subjects mentioned above . . . not so much. However, there is a subject of somewhat lesser importance which I believe could benefit from having a little daylight shed upon it. If nothing else, I do like to stretch people and encourage them to think outside the box; perhaps by considering what I offer below, some will come to a better understanding of what I've mentioned above, and just how pervasive some or our modern misconceptions really are.

Of course, we also want your money. :-)

The Point

Okay, for whatever reason, some people appear to be under the impression that in order for an organization to accept donations, they need to be a state-sanctioned 501(c)3 tax-exempt corporation. As we explain elsewhere, this is simply not the case. In truth, there are many charities, churches and other non-profit organizations who never go that route.

Be that as it may, there are certainly people who will only donate to organizations that are tax exempt. Fortunately, we believe this number to be few. Furthermore, while we may bemoan this state of affairs, we actually understand the mindset. After all, ever since the New Deal, Americans have been programmed to accept the notion that government actually has a legitimate role to play with respect to charity (so much for separation of church and state).

Anyway, if you fall into this category, I'd like to encourage you to consider an alternative.

For starters, we should make sure that everyone understands what a tax deduction is . . . and what it isn't. It is not a direct reduction of your tax burden. It's not like you figure out what your taxes are and then reduce it by x amount. Instead, a tax deduction is really a reduction of your taxable income. In figuring your taxable income, you subtract the amount of your deductions, and then figure your tax burden based on the final taxable income figure. Most people, of course, already understand this. But it's important for understanding what comes next.

All right, let's assume that you are an individual (which of course you are), that your filing status is Single, and that you have a net taxable income of $100,000, before calculating any deductions based on donations. This places you in the 28% tax bracket, but that doesn't mean you pay 28% of the $100,000 in taxes; that's just the highest rate applied to any of your income. Based on 2011 tax brackets, your total tax burden would be around 22%. If we care to be precise, the amount would be $21,617.

Now, let's assume that you have $1000 that you'd like to donate to a worthy cause, and that you insist on getting a benefit from that in the form of lower taxes. Again, I don't think many people actually think this way, but let's say you do. What follows are two scenarios that illustrate how you can get essentially the same end-result regardless of whether the organization you're supporting is tax exempt or not.


You find an organization that you'd like to support and you discover that they are a state-sanctioned 501(c)3 tax-exempt non-profit corporation. You donate your $1000 to them, for which they are exceedingly grateful. At tax time, you take the deduction, and reduce your taxable income to $99,000. You would now pay $21,337 in tax.


You find an organization that you'd like to support and you discover that they are not a state-sanctioned 501(c)3 tax-exempt non-profit corporation. Instead of donating the full $1000 to them, you reduce the amount of your donation to, say, $700 . . . for which they are exceedingly grateful. At tax time, you are unable to take a deduction for this donation, so you would still need to pay the full $21,617 tax based on your $100,000 taxable income.

As you can see, in Scenario 2 you would pay $280 more in taxes than you would in Scenario 1. But here's the thing: With Scenario 2, you have $300 more in your bank account with which to pay those taxes. You actually come out $20 ahead.

You can of course play around with the figures based on different income levels, donation levels, and filing statuses, but the point is this: You do not need to withhold your support based on whether or not the organization is tax exempt. And trust me when I tell you that the organization that receives the $700 will indeed be exceedingly grateful. If you don't believe me, I can certainly prove it. In fact, I double-dog dare you to test this theory right now by writing out a $700 check to the Northside Falcons. :-)

Footnote:  Don't forget that if you own a business, you can in fact deduct 100% of your support by simply taking advantage of one of our effective advertising options. Call us at 936-443-1969 if your business would like to support the Falcons. Thanks.

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