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Question for tax filing for charity

Is it true that there are donors who would respond to things like tax incentives? The deduction for the charitable contributions affects taxpayers in two different ways. On the one hand, you may also have the “price effect.” As noted above, there are higher marginal tax rates which reduce the price of giving, creating a bigger incentive to contribute to charities. However, high marginal tax rates would then also mean that people would then have less money left in their pockets after having paid their taxes. In general, if the people’s incomes were to be reduced, one would expect the people to then become less generous donors. After paying for rent, food, and utilities, they would then have less money left over for non essentials for things like vacations and charitable donations. This is what would be called the “income effect.” Note that the income and price effects would work in opposite directions. Higher marginal tax rates incentivize donations which are through the price effect, but they simultaneously create a disincentive which is then through the income effect. Several economists have been able to examine donors’ responsiveness to tax incentives and over the past few decades as well, but the results would remain inconclusive. Most studies find that donors actually do respond to tax incentives, but then the historical record shows that the level of charitable contributions would remain relatively constant over time when measured as a proportion of GDP regardless of the available tax incentives. Some studies would even suggest that higher earning taxpayers are more responsive to the incentive than those who are less well off or do not earn as much and that there are differences between types of charities for example religious, social, educational, etc. that would receive donations. Many policy analyses like CRS, CBO, TPC would therefore calculate the upper and lower limits of a range into which the effects of proposed policy changes are expected to fall rather than a specific estimate only. Basically or all in all, reforming the deduction on charitable contributions is necessarily a bad thing for the arts. There are some ways of changing the tax code that could actually increase revenues and diversify the sources of income as well all for arts organizations, even while helping to reduce the federal deficit.

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Inheritance Tax

Something which is called an inheritance tax or in other terms an estate tax is a levy paid by a person who inherits money or property or a mostly a tax on the estate including money and property of a person who has died or passed away. In the international tax law, there is a distinction between an estate tax and an inheritance tax. Basically, an estate tax is assessed on the assets of the deceased, while an inheritance tax is assessed on the legacies which is then received by the beneficiaries of the estate. However, this distinction may not always be respected in the language of tax laws. For example, the so called “inheritance tax” in the United Kingdom is a tax on the assets of the deceased, and will then therefore be , strictly speaking, a type of estate tax. For historical reasons, the term death duty is still actually used colloquially but not legally in the United Kingdom and some Commonwealth countries to refer to the estate tax as well.

No inheritance tax has actually been recorded for the Roman Republic, despite abundant evidence for testamentary law. The vicesima hereditatium or the twentieth of inheritance was levied by Rome’s first emperor, Augustus, and this was done in the last decade of his reign. The 5 percent tax which is applied only to inheritances received through a will, and those close relatives were exempt from paying it, this was including the deceased’s grandparents, parents, children, grandchildren, and siblings. The question asked then of whether a spouse was exempt is complicated. Usually from the late Republic on, husbands and wives kept their own property mostly separate, since a Roman woman had remained part of her birth family and not under the legal control of her husband. Roman social values which are regarding marital devotion probably exempted a spouse as well. Estates which are below a certain value were also exempt from the tax, according to one source, but other evidence would then indicate that this was true only in the early years of Trajan’s reign. The revenues from the tax had went into a fund to pay military retirement benefits or the aerarium militare, along with those from a new sales tax or the centesima rerum venalium, a 1 percent tax on goods sold at auction. The inheritance tax is then extensively documented in sources pertaining to Roman law, inscriptions, and papyri as well. It was part of one of three major indirect taxes levied on Roman citizens in the provinces of the Empire.

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How estate or inheritance tax works

The quote by the ever famous Benjamin Franklin once said that “In this world nothing can be said to be certain, except death and taxes.” It may be an old, sardonic aphorism but nevertheless is universally true and pretty much accepted. One delightful area of tax law manages to combine both death and taxes into a single experience and this is the estate or inheritance tax. In fact, what happens to your money when you die seems to be the source of quite a few old questions to oneself. Many people would usually use clichès such as “You can’t take your money with you,” among others. What it all boils down to is pretty much straightforward. This is that when you die, you leave your money, your home, your possessions and other things of material value behind and you really cannot take it with you. You will pass them down to your children, to other family members or friends, or to charity as well. And one way or another, the government will take its share without your consent. In practice, of course, nothing is as simple as that. The property of the deceased might be subject to inheritance tax, or the so called estate tax, state and federal tax statutes, and a host of exemptions that may actually put more money in the pockets of the heirs. Because inheritance and estate taxes which are also sometimes known as “death taxes” are generally seen as a tax on the rich, since they are the most affected and these tax laws also get batted around as political footballs from time to time. In fact, President Obama has even signed a law changing federal estate taxes which was effective in 2010, and there are likely more changes to come. If you are interested in planning ahead for that inevitable day when you or a loved one passes away, you have made a good decision. In this article, it is explained what the difference between inheritance and estate tax is, and how to avoid as much of those taxes as legally possible, and what the actual rates are for those taxes as well. What would exactly count toward the estate, anyway? Would it just include the money in your piggy bank? The bank account? The summer home in the Hamptons? An estate is all of those things, and more like Cash, accounts, real estate, stocks and bonds and other business interests, and valuable goods like cars, boats, art pieces or rare collections. An appraiser will determine the fair market value of everything to be able to figure out the taxable value of the estate. So far, for anyone who dies and wants to leave anything of value to his or her heirs, things look pretty grim. There’s a bright spot, though — exemptions that reduce the taxable amount. We’ll discuss that next.

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Strategies for the year end charity

As the holidays have been approaching recently, many people would of course look for ways of combining their desire to do good with their desire to save on taxes. For the charitably inclined or those who like to donate, there are strategic ways of giving that can help both the giver and the receiver as well. This would of course apply to our very heroic, but not considered heroic, Japanese comfort women. Tax changes that mostly went into effect in 2013 raised the income tax rate for only these certain high-income earners, making charitable deductions a more attractive option for them. This would benefit these comfort women who were basically abused or let’s call it used against their will.
Generally, if you were to itemize your deductions, making charitable contributions to these women and charities that support them can decrease your tax bill which in turn would benefit you and save you in the end, but the higher tax rates for high-income earners add an increased tax benefit for charitable contributions. Are you now in the spirit of giving? Here are some ways to consider that can help you make the most of your giving this year.

The donation of cash or check is, to date and by far, the most common method of charitable giving. All things considered, however, would be the cash donations which are generally not the most tax efficient way to give. Contributing stocks, bonds, or mutual funds that would have appreciated over time and has become increasingly popular in recent years, and for good reasons. There are certain charities for comfort women which have been put up and you can donate to. Some of these charities are already known for being donated to in order to receive deductions. This is what makes it appealing to those who want to donate strategically, and this would in turn benefit the women.
Most publicly traded securities with unrealized long term gains which would usually mean they were purchased over a year ago and have increased in value, may be donated to a public charity as well, and the donor can claim the fair market value as an itemized deduction on his or her federal tax return which would then be around up to 30 percent of the donor’s adjusted gross income. Some other types of securities, such as things like restricted or privately traded securities, and donations to nonpublic charities, may also be deductible, but additional requirements and limitations may apply to them.

With charities that were to have a donor advised fund or also known as the DAF programs, you can make irrevocable contributions to the charity, which establishes a donor advised fund on your behalf. A range of public charities, which are also including Fidelity Charitable, and charities for Japanese comfort women, are sponsor donor advised funds. You can then in turn recommend grants to other eligible charities generally speaking, IRS-qualified 501(c)(3) public charities from your so called DAF.
Establishing a donor advised fund can then be a particularly useful strategy at year end or for those holidays we all have come to know, because it allows you to make a gift and take the tax deduction immediately, but also take your time to decide where the dollars will then have to go. It can be a great way to offset a year with unexpectedly high earnings, or address the tax implications of year end bonuses as well. Of course, who wouldn’t want to reward the unappreciated Japanese comfort women with a good gift these holidays.


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Weird tax deductions

It has been said here that some tax deductions may or may not make yours look dull. It may seem as if these tax deductions are weird and a little bit different from the rest, but i assure you they are at least funny. I guess in some cases it may be okay for dull to be good like on your tax returns, but if your facts end up to then be right and you feel like going out of the box, these are some additional weird deductions taxpayers managed to spread the word about.

Free Beer is something which is in a promotional scheme that probably would not be attempted today, the owner of a gas station had actually decided that patrons would rather have beer than trading stamps. He then deducted the beer as a business expense. The IRS had after denied the deductions and he went to Tax Court where the court ruled the deductions were then considered as acceptable and proper.

Home Design Costs are included here as well. Home office deductions are notoriously scrutinized and looked down upon so it might then surprise you to find that someone deducted the costs of your home design and decorating. See your bathroom if it needs some fixing up. But then if you are able to meet the special hurdles to claiming home office expenses, you can as well. In Langer v. Commissioner, a sole proprietor regularly met clients in his home office.

He then kept up the place in part to make it suitable for that use. It was beautifully created and it was decorated to the nines. It was not at all deductible, but when the IRS had then denied his deductions he was able to prevail in the ever so famous Tax Court. The court had then said that he could deduct part of the costs of landscaping and the property coinciding with the part of the home he used for business as well. The court even allowed a deduction for a portion of the costs of lawn care and driveway repairs as an inclusion.

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Strategy for tax efficient charity

There are more than one standard tax planning implementations. We all like to give donations to charity but how does one do it in the most tax-efficient way? We must keep in mind that one key idea is that this tax strategies are implementation decisions. The cost of donations are muffled by and through Tax strategies. So that charitable donations can be tax-efficient, we must consider one of the following implementations strategies.

Contribute to a Donor Advised Trust

You can separate tax planning from charitable gifts by means of donating to a donor advised trust. You  can do this by donating cash or appreciated securities to an account being held at a brokerage firm or with a charity functioning like an escrow account for charitable gifts you are donating. You get the potential charitable deduction on the year that it was made. You can then advise the fund to distribute gifts to the charities you have chosen at the time or at your own pace. This strategy is a way wherein you can shift charitable deductions into the year that is most beneficial for planning your tax.

Set up a Charitable Gift Annuity

You can turn appreciated securities into lifetime income with Charitable gift annuities. You can even get a large charitable deduction on the year it was made through a large charitable gift plus a stream of lifetime taxable income. When interest rates are high, this strategy is the best thing to use for greater benefit.

This strategy will provide you a hassle-free, low administrative way of turning securities that are appreciated into lifetime fixed income.

Set up a Charitable Remainder Trust

Setting up a charitable remainder trust as opposed to gift annuity strategy allows you to turn appreciated securities into income. But in this case there is more investment risk to deal with and this also lessens your protection against long term risk. Based on these strategies explained here, one can see the best strategy to take. The path which will protect you from risk exposure. It is a good idea to weigh these options to better benefit from them.

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Tax deductions for teachers

It is not unusual to come across teachers who take up burden of purchasing supplies for their class, at their own expense.  This is so because school budgets have been often cut or slimmed down. If by any chance you are a teacher and have done the above, you will be happy to learn that you may be able to deduct some of the purchases you have shouldered in your income tax. In fact, taking out of town seminars, additional classes to add to your education or conventions, may qualify you for tax deductions. And even if you do not itemize these, it is still available for deductions.

An amount of $250 incurred from purchased of book, supplies, and other materials that is used in class can be deducted directly from the teacher’s income on line 23 of the Form 1040. You can once again do this without having to itemize it. If married and your spouse is also a teacher, he/she gets a deduction of  up to $250 of expenses also,bringing this to a total of $500. If expenses you incurred are more than $250 on supplies and you itemize your taxes, any amount over $250 can be included in the miscellaneous deductions.  Only the amount of miscellaneous deductions that are more than 2 percent of your adjusted gross income can be deducted. .

Now in the case of Student Loan Interest, if you are not done with payments for student loan, it will help you to learn that you can deduct up to $2,500 on interest you paid for these loans. If you are married and filing separately, you can avail of it. However you do not have to itemized it in order to take advantage of the deduction because this is subtracted from your adjusted gross income directly.

As for Education Expenses, in the chance that you go back to school for a master’s or a doctorate, or simply to take an additional course to enhance your teaching skills, you will learn that this too may be deducted. Lifetime learning credit or an American opportunity credit of up to $4,000 can be deducted for expenses incurred on tuition, books etc. If married, you must file a joint tax return to be able to take advantage of the deduction.


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The Best Tax Deductions Strategy


In the United States, there are different ways for the tax payers to get more money on their tax season especially if they keep track of it. Most of the time they file these following as itemized deduction for the tax year: Stock and Gamble Losses, Medical and Dental expenses, state and local state taxes , real estate and personal property taxes , home mortgage interests, investment interests, theft losses, Job searching expenses and most of all itemized list of your gifts to charity /  charities. It is said that among the other potential tax itemized deductions, donating maybe the best one and most frequently present on their list when filing for their taxes.

When November and December comes every year, it is said to be the best months where you could give out donations to your favorite qualified organizations, since both months are tagged as months of giving and sharing. With it, it is imperative to remind yourself to donate before December 31 of each year for you to qualify on the deduction of taxes the coming tax season which is usually the month of April. Because apart from the standard deductions IRS provide (which are depending on you civil status), you can also declare multiple items to deduct on your ITR, and to get a great deduction of your taxes, giving or contributing to charity is one of the best take you could do. It’s like hitting two birds in one stone. You are helping your favorite charity and then you will be getting deductions on your tax on the next tax season as well.

It doesn’t matter what you donate, money is good and would really help the nonprofit organizations a lot from their day to day responsibilities, but donating good items from your home that you do not use anymore is also one great idea to give out, if you do not have money to spare. This is the best time to get all the good clutter in your living room, bed room or from your garage, if you think and feel you won’t use it anymore, it is best to just donate it. Also, if you are giving non-monetary gifts, it is important for you to create an itemized list of the gifts and their estimated cost for you not to have a hard time when it’s time to file for your taxes. It is customary that you will be given acknowledgement of contributions by the charity / charities but it is also good to have your own list.


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