Charitable Contributions and Tax Benefits Unfortunately, Much

Charitable Contributions and Tax Benefits

Unfortunately, much of the elite of the upper class are afforded leeway and loopholes on tax obligations that allow them to pay much less percentage wise than other taxpayers in different income brackets. Much of this is due to the ability to use tax deductions, like charitable contributions in large amounts, to lower their annual personal incomes before taxes. However, many of the top contributors to charity donate above the maximum allowances for charitable deductions, showing a clear resolution to give based on ethics, rather than for the sole purpose of tax deductions alone,

Bill Gates is currently one of the top money makers in the world, yet he is also one of the largest contributors to charitable institutions as well. The amounts of donations Bill Gates contributes to various charities, including his own charitable foundation, is well over the top end limit of what is allowed for tax credits regarding donations to charity. He often donates above the 50% limit on cash contributions. In fact, through his charitable foundation, Gates is one of the largest private donators to philanthropic causes. Some reports show that Gates contributes around 66% of his net income to charitable causes (Mail Foreign Service 2010). In 2010, he pledged $10 billion in order to help allocate funs for research and distribution of children's vaccines across the globe. Here, the research states that "the Microsoft founder hopes the money, to be spent over the next ten years through his foundation, will save the lives of more than eight million children in the world's poorest countries," (Mail Foreign Service 2010). This was the single largest donation that had ever been made by an individual to a charitable cause. Thus, it is clear that Gates is making donations, not necessarily for tax deductions alone, but for the ethical purpose of helping those who are less fortunate. In this regard, it is obvious he will continue to donate. It is my advice to make sure these large donations, which are to be spent over a long breadth of time, are properly itemized, so that Gates maximizes his appropriate tax deductions.

Warren Buffet is another major philanthropist that gives away enormous amounts of funds to various charities. Overall, out of the 64,855,038 Buffett made in 2010, he only had a taxable income of $39.814.784 (Kim 2011). Only 17.4% of his taxable income was actually paid to the IRS in taxes (Kim 2011). Charitable donations were one of the top tax deductions claimed by Buffett in his 2010 tax returns, along with business expenses and state taxes. In fact, Buffett donated $3.27 billion in 2010, over half of his income for that year (Kim 2011). This far exceeds the maximum amount allocated by the IRS for donations, and so Buffett was giving even after it stopped being a benefit to his own estate. This is attributed to his philosophy on the upper class' role in the economy. According to the research, "Buffett has argued that the wealthy do not pay their fair share of taxes compared to the middle-class," (Kim 2011). He has been taking an ethical stance to increase the amount of taxes paid by the super rich in this country. Along with Gates, Buffet is participating in the Giving Pledge, which is "asking the super wealthy to donate half their fortune to philanthropic causes, (Kim 2011). Essentially, Buffett is maximizing his tax write offs in terms of charitable donations, yet the purpose of Buffett's contributions are not geared towards reducing his tax rate; rather, they are purely for philanthropic reasons. He is just gaining the added bonus of having some of those donations help reduce his overall taxable income at the end of the year. So yes, it would be advised that he continue to be active in giving donations to charitable organizations. Yet, in order to retain a strong financial standing, I would recommend that Buffett do lower amounts being given.

A much different strategy than the previous two individuals is the one seen in the case of the late Steve Jobs. The former Apple CEO made billions throughout his career. Yet, Jobs "has long been criticized for his lack of giving," (Jacobs 2011). After his death, discussions on his charitable donations have pointed to the idea that Jobs may have donated anonymously, rather than through cash donations, like Gates and Buffet. He could have potentially made charitable donations through a charitable trust, or through making a charity a beneficiary of assets, like part of his estate (Jacobs 2011). However, there is a lower limit for donations made through property donations, which can only make up 30% of an individual's gross income. Jobs should have been working with cash donations to maximize tax benefits. This would have allowed Jobs to have claimed more tax deductions based on charitable donations.