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re: Mizzou NIL
Posted on 12/4/23 at 11:35 pm to surgicalvenom
Posted on 12/4/23 at 11:35 pm to surgicalvenom
Appreciate the support for the Mizzou program. But, you realize the tax brackets are "marginal". Let's say the 52% to 55% bracket change occurs at $750k and your taxable profit is $1M. Then you only pay the 3% increase on the amount above the 52% level or $250k in this case, not the full $1M. Since the increased tax rate is 3% on $250k the "extra" tax is $7.5k not $30k.
So, in your example of $760k with a $10k NIL deduction, you reduce your taxes by $5.5k (since it's all in the 55% bracket), not $30k since the amount below $750k remains in the same bracket(s). You paid $10k to get that deduction, so it cost you $4.5k to give Mizzou a $10k NIL. Awesome donation and much more economical to make it but it is still costing you money to make the donation.
So, in your example of $760k with a $10k NIL deduction, you reduce your taxes by $5.5k (since it's all in the 55% bracket), not $30k since the amount below $750k remains in the same bracket(s). You paid $10k to get that deduction, so it cost you $4.5k to give Mizzou a $10k NIL. Awesome donation and much more economical to make it but it is still costing you money to make the donation.
2
Posted on 12/5/23 at 6:33 am to truman_in_nc
Yes I realize that, but I was using simple numbers to explain NIL not to teach accounting.
I'm not here to brag about my donations or my business that would be inappropriate. The point is there is a real process most of us go through. There is this perception we just write checks to buy kids off the portal. When the truth is we're a bunch of small businesses using a pain-free method to build the Mizzou collective.
I'm not here to brag about my donations or my business that would be inappropriate. The point is there is a real process most of us go through. There is this perception we just write checks to buy kids off the portal. When the truth is we're a bunch of small businesses using a pain-free method to build the Mizzou collective.
This post was edited on 12/5/23 at 7:31 am
Posted on 12/5/23 at 9:42 am to truman_in_nc
quote:
Appreciate the support for the Mizzou program. But, you realize the tax brackets are "marginal". Let's say the 52% to 55% bracket change occurs at $750k and your taxable profit is $1M. Then you only pay the 3% increase on the amount above the 52% level or $250k in this case, not the full $1M. Since the increased tax rate is 3% on $250k the "extra" tax is $7.5k not $30k.
So, in your example of $760k with a $10k NIL deduction, you reduce your taxes by $5.5k (since it's all in the 55% bracket), not $30k since the amount below $750k remains in the same bracket(s). You paid $10k to get that deduction, so it cost you $4.5k to give Mizzou a $10k NIL. Awesome donation and much more economical to make it but it is still costing you money to make the donation
This is what I was hinting at. Spending more to get below a marginal tax bracket still costs you more money. Sure you pay less taxes but in the end you still have less money in the bank account.
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