Saving taxes is rarely the main motivation for making charitable contributions. Most people give out of a desire to benefit humankind, not to save taxes.
However, the tax savings generated by charitable contributions enables donors to give away more than they might otherwise have thought possible.
- A donor in the 35% tax bracket who planned to give $10,000 cash, can actually give $15,385 and be out-of-pocket only $10,000 after factoring in the tax savings from the deduction.
- A donor in the 35% tax bracket who gives long-term stock worth $10,000 that has appreciated from $5,000, is really giving only $5,750 out-of-pocket. He’s saving $4,250 in taxes.
There is a $3,500 tax savings from the donation ($10,000 x 35%), plus a capital gains tax avoidance of $750 (15% of the $5,000 of appreciation assuming your capital gains are taxed at 15% rate).