Does donation really reduces tax?

[anfielder]

Yes, they do pay less tax, they prefer to donate to charity than donate more to gahmen lor, so long they pay less regardless of quantum, that amt saved is considered donated to charity not gahmen lor, hahaha

If a large amount is donated, the donor might get some recognition e.g. building named after them, plaque, media reports...

If they don't donate and pay the tax, the gahmen just thanks them for their contribution to nation building (same as everybody else)

 

[cscs3]

I think we are just looking at different angles.

How I see it is that if my taxable income for 2015 is 350k, I could donate enough to reduce the taxable income to 320k and below to avoid the tax for the tier above 320k which is quite hafty.

So you have to donate 30K. But that does not means you pay 30K lesser. So in the end your net worth is less because you donate 30K.

 

[hwmook]

Not really.

if you earn > 320,000 pa. ($350,000 for example):
Tax on First $320,000 = $42 350
tax on next $30,000 X 20%= $6,000.
total tax = $48,350.

if you were to make the 30k donation.
your income become $350,000 less donation $75,000 (30,000 X 2.5). therefore chargeable income = $275,000

Tax rate:
tax on First $200,000 = $20,750
tax on Next $75,000 X 18%= $13,500
total tax = $33,500

therefore your tax saving = $48,350 - $33,500 = $14,850.

You are an accountant? Serious? You donated $30000, save tax of $14,850. You still end up giving up $15,150.

 

[The Accountant]

You are an accountant? Serious? You donated $30000, save tax of $14,850. You still end up giving up $15,150.

Yikes. you beat me to it. i wanted to delete this post. Haven been reading the question clearly. my bad. You still have negative cashflow.

 

[Panerex]

Yes still negative cash flow, that's why I don use donation as a tool for tax savings. Only use CPF & SRS

 

[tiny]

A side track ...

I called in the various Mediacorp charity shows to donate $$ last year. I have not seen the 2.5X donated amount reflected in my Income tax during filing earlier this year.

So, I should expect to see the deduction in the initial assessment?

Telephone charity phone numbers unlikely to be tracked. Need to submit NRIC for tax deductions.

 

[neolaw]

Short answer, yes. Donation to approved charity reduces tax if you need to pay tax.

However, the reduced amount (tax) is almost always less than the amount you donate.