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Schnepper-Malagoli Charitable Tax Grab
Posted By Jim On 06/24/2005 @ 9:00 am In Taxes | No Comments
While doing research for my last FSA article, I came upon an article written by Jeff Schnepper (article was taken down from MSN) that was listing ideas for cutting your 2004 taxes. I skimmed the article, most of which is common knowledge, until I hit upon something called the Schnepper-Malagoli Charitable Tax Grab. You can read the excerpt in full below but essentially you can rent out part of your home tax free (up to 15 days) to a charity (or anyone really), then donate to the charity, and walk away with extra money (and a warm fuzzy feeling) in your pocket as long as there was no pre-arrangement.
Here’s one you don’t have. It’s called the Schnepper-Malagoli Charitable Tax Grab. You can rent your home to anyone during the year — up to 14 days total — and pay zero tax. (Internal Revenue Code Section 280A (g), for those of you who feel compelled to look it up.)
So your church, synagogue or any recognized charity rents your home for a board meeting. They pay you $500. That money is completely tax-free.
Without any compulsion or prearrangement, you also contribute $600 to the charity. If you’re only in the 25% bracket, you save $150 in tax. You also got $500 tax-free from the rental. That’s a total of $650 more in your pocket, less the $600 contribution. You’re up $50 and the charity is up $100. One meeting per month (12 is less than 15) and you’ve “made” $600 and the charity is up $1,200!
Was it intended when Congress drafted the tax code? Clearly, no. Is it completely within the clear wording of the code? Absolutely, yes! Just because it’s a loophole doesn’t mean you can’t legally do it. And, there’s nothing wrong with doing well as you do good.
It’s brilliant, anyone ever heard of it (it has a doozy of a name)?
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