Donating to charity doesn’t “get around taxes”, because you no longer have that money. A simple example: you’re paid $100,000. In scenario 1 you don’t donate anything and you pay 25% in income taxes, leaving you with $75,000. In scenario 2, you donate $10,000 to charity. You pay 25% on the remaining $90,000, netting you $67,500 ($100,000 - $10,000 - $22,500). So yes, you’ve paid less taxes, but you also have less money.
To be deductible, you have to donate to a recognized nonprofit organization. You can’t just setup a company and donate to it. That would be considered a gift, not a donation, and you would have to pay the gift tax.
I don’t work with taxes, but I read something about how you can setup a company, donate the money to the company, and avoid paying some of the taxes by doing so. This would also stop you from having to show your face on tv and would keep your identity a secret from most people.
Lotteries in the US are run by nonprofit state entities, so the feds don’t get a cut of the ticket sales. Ergo, they need to get their cut from the winner. I suspect, although maybe I’m wrong, that the UK government gets its cut out of ticket sales.
You can’t “donate” anything to a for-profit company. You can invest your winnings in it, but you’d still have to pay taxes on the winnings first.
You could set up a private foundation, but that’s no different than donating to charity. You’re still limited to a 50% (i.e. if you make $760m, the most you can deduct is $380m, and you’d still owe taxes on the other $380m. You’d get to carry the other $380m forward for ever and ever, but every year, you’d still be limited to 50% of income.)
If you were the CEO of the foundation and you made a salary, your salary would be subject to income tax.
i imagine some people must do that, create an organization that they control, donate the money there, then spend it on whatever with no tax, and can grow it without being taxed. charitable contributions is an interesting way to avoid taxes and control the money. if you win the lotto i think 50% of the jackpot can be offset.
another way to donate if you have after tax money, instead of contributing to charity, i would much rather invest in an unprofitable company trying to change the world. say like a spacex or some other tech company trying to learn more and advance the human race as oppose to helping the needy etc. if they win, i win too through share appreciation, if they lose, fuck it, i get a tax deduction.
some major companies already do this. some pharma and tech firms. google, as we all know generate almost all their revenue and profits from their search ads etc. other bets contains all their losers. now the losers lose a fuck ton of money and is essentially subsidize by their profitable main biz.
people think lets get rid of other bets, but other bets serve 2 purposes:
keeps them up to date, aware of disruptive tech, and search for potentially revenue generators.
You can setup trusts and/or LLCs (limited liability companies) to help maintain your anonymity and reduce taxes. For example, say you had the winning ticket, have 3 kids, and want them to each get 1/4 of the prize. If you claim the prize and then give them each 1/4, you’ll get taxed twice, once when you claim the prize and once when you give them the money. If however, you setup four trusts (one for yourself and one for each of your kids) and say the trusts jointly own the ticket, each of the trusts will have to pay taxes, but only once. If you name your attorney as the trustee of each of the trusts, only he/she will have to appear in public to claim the prize on behalf of the trusts and you and your kids will remain anonymous.
In the US, you have a gift & estate tax. (Theoretically, they’re two different taxes, but in reality, they’re the same thing.) You have a lifetime exclustion of $11m (for a married couple). You also have an annual exclusion of $14,000.
In other words, you can give $14,000 per year (28,000 if you’re married) to anyone you want to. Once you give them $14,001 in any given calendar year, you have to file a gift tax return, and it reduces your lifetime exclusion.
So i(assuming you’re married), f you gave me $1,000,000, the first $28,000 is not taxable, but the remaining $972,000 is reduces your lifetime exclusion. So your exclusion amount is now $10,028,000.
Do this for a few more years, and you will eventually run out of your exclusion. Now, everything you give (above $28,000) is taxable TO YOU at a 40% tax rate. So if you give me $1m, you can expect to pay ~$390k in gift tax.
Why do I say that gift and estate tax is the same thing? Because when you die, you get to reduce your estate by the amount of your lifetime exclusion, and the remiainder is taxed at estate tax rates, which are almost always the same as gift tax rates (by design).
So (assuming you’re married), if you’re worth $30m, give away (a.k.a. use up your exclusion) $7m, then your gross estate is now $23m. The taxable amount is then reduced by $4m (the remaining exclusion), and you will pay 40% tax on $19m.
Long story short–you can’t just go around throwing wads of cash out on the street, Jesse Pinkman-style. Doesn’t work with US tax law.
It’s actually not all that easy to qualify as a church. To do so, you have to satisfy a significant number of the following:
Distinct legal existence;
Recognized creed and form of worship;
Definite and distinct ecclesiastical government;
Formal code of doctrine and discipline;
Distinct religious history;
Membership not associated with any other church or denomination;
Organization of ordained ministers;
Ordained ministers selected after completing prescribed study;
Literature of its own;
Established places of worship;
Regular congregations;
Regular religious services;
Sunday schools for religious instruction of the young; and
Schools for preparing its members.
If you’re just some dude looking to live off of a few bucks donated from some people thinking you’re the next coming, the IRS probably isn’t going to notice/care, but if you’re trying to avoid taxes on several hundred million dollars in lottery winnings, the IRS is gonna care.
You can’t spend it on whatever and maintain tax-exempt status. Tax-exempt charities/foundations have to have a demonstrated community benefit and they do get audited by the IRS. That being said, your charity can certainly own a Gulfstream G650ER that you, as head of the charity, use to fly to events where you provide community benefits and it can own a really nice car that you use for conducting charity-related business, but if it starts owning mansions and other stuff that isn’t needed for the charity to provide its community benefit, you’re going to be in trouble when you get audited. And as Greenman already said, any salary the charity pays you is taxable as your personal income.
But for the fact that I go to work everyday, my life is not boring, hence no need to significantly change it other than replacing work with recreation and travel. I have a very small, tight circle of friends that I’ve known since 5th grade who I would trust with my life, or to help me get rid of a body if needed, so they’re irreplaceable. Were I younger, single, and childless, I would almost certainly be that rich DB blowing money left and right on shiny things and shiny people who tell me how great I am (as long as the money keeps flowing), but I’m passed that and know what makes me happy and what’s actually important.