Question

a $100 donation is made the following taxpayers.

advise which of these taxpayers will get the biggest tax benefit :

Mark who is subject to the top marginal tax rate

Veronica who is subject to a marginal rate of 19%

A company with a flat tax rate of 30%

Answer 1

Answer: Person M would get the biggest tax benefit.

Tax benefit depends on marginal tax rate. If this rate is high, tax burden is high, which the taxpayer doesn’t have to pay because of tax relief due to the donation. This is the enjoyment of tax benefits.

Person M has high marginal tax rate; therefore, he is enjoying the highest tax benefits.

The company has the flat tax rate (30%), which is its marginal tax rate. This rate doesn’t fall under top rate. Therefore, the tax benefit is not the highest.

Person V has the lower marginal tax rate, which is 19%. It indicates the payment of lower amount of tax and may not need tax relief or tax benefit.