Jed is right in essence, and since I am not a CPA, I cannot shed too much more light, but think of it this way. Say I earn $800,000,000 a year. Any additional dollar I earn is taxed at 35%, so I only take 65 cents home. If I use that dollar towards a tax deductible purchase, say donating it, I do not pay the tax. In this case, if I donate that dollar, I still lose the dollar, but the nonprofit I donate it to gets a whole dollar. If I use it towards a company car, I still don't earn the dollar, but my company does get a car.
Chapter 5 Curiosities
taxes
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