Benefits Received Rule

AAA

DEFINITION of 'Benefits Received Rule'

1. A theory of income tax fairness that says people should pay taxes based on the benefits they receive from the government.

2. A tax provision that says a donor who receives a tangible benefit from making a charitable contribution must subtract the value of that benefit from the amount claimed as an income tax deduction.

INVESTOPEDIA EXPLAINS 'Benefits Received Rule'

1. The appeal of the benefits received rule is its apparent fairness - those who benefit from a service should be the ones who pay for it. This is not how the tax system works in the United States. The U.S. tax system is a "progressive" or "ability-to-pay" system, meaning that those who make more money tend to pay taxes at a higher rate and those who make less money tend to pay taxes at a lower rate or even receive taxpayer-funded benefits while paying no taxes at all. Another alternative is a flat tax system in which everyone pays the same tax irrespective of income.


2. Under the benefits received rule, if Jane bought a $500 ticket to a nonprofit fundraising gala and received a dinner worth $100, she could only claim $400 as a tax deduction.

RELATED TERMS
  1. Welfare State

    A concept of government in which the state plays a key role in ...
  2. Social Welfare System

    A social welfare system is a program that provides assistance ...
  3. Stealth Taxes

    A type of levy that governments use to increase their revenues ...
  4. Social Security Benefits

    The monetary benefits received by retired workers who have paid ...
  5. Taxes

    An involuntary fee levied on corporations or individuals that ...
  6. Welfare

    A government program which provides financial aid to individuals ...
RELATED FAQS
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  2. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  3. How are write-offs recorded on my tax return?

    The way your write-offs are recorded on your tax return varies depending on whether you are filing a personal or business ... Read Full Answer >>
  4. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>
  5. What are some good free online calculators for AGI (adjusted gross income)?

    Both CNNMoney.com and Bankrate.com offer free online calculators for figuring adjusted gross income, or AGI. Calculations ... Read Full Answer >>
  6. What is the difference between AGI (adjusted gross income) and gross income?

    In the United States, individuals pay taxes based on their adjusted gross income, or AGI, rather than their gross income. ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    10 Tax Benefits For The Self-Employed

    Running your own business has both personal and financial perks.
  2. Taxes

    The Tax Benefits Of Having A Spouse

    Check out the perks designed to promote and preserve your post-work savings - if you're married, that is.
  3. Entrepreneurship

    Top 10 Home Business Tax Tips

    If you work for yourself, make sure you are getting the most for your tax dollars.
  4. Taxes

    Weighing The Tax Benefits Of Municipal Securities

    Find out how to determine whether the tax exemption offered by "munis" benefits you.
  5. Retirement

    Maxing Out Your RRSP (Canadian)

    Increasing your savings will provide tax benefits - and peace of mind.
  6. Investing Basics

    Got Dividends? Here's How to Reinvest Them

    Reinvesting dividends is almost always a good idea if you intend to hold your shares for the long term, and there are several ways to do it.
  7. Taxes

    Are You Paying Too Much in Taxes?

    Overpaying taxes amounts to an interest-free loan to the government. Here are some ways to avoid that scenario.
  8. Taxes

    What's a Tax Shield?

    A tax shield is a deduction, credit or other means used to reduce the amount of taxes an individual or business owes to the government.
  9. Taxes

    What's an Indirect Tax?

    An indirect tax is levied on goods or services rather than on an individual or a company.
  10. Taxes

    Understanding Excise Taxes

    An excise tax is an indirect levy charged for the sale or use of a particular item.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!