Tax deduction for paying down U.S. debt

June 4, 2010

This is one of my favorite off-beat tax breaks: voluntary payments to the ease the public debt.

Yep, as I noted back in April, such gifts to the U.S. Treasury are tax deductible.

It's not a well known, or very popular, tax break. Most folks aren't inclined to give the federal government more than they already pay in taxes.


Uncle sam hat with money3 But every now and then the voluntary debt reduction program's existence gets some attention.

I bring it up again today because this morning on NPR's Morning Edition show, I heard a Planet Money feature on the national debt donation option.

David Kestenbaum talked with Kay Fishburn, a Wisconsin nurse who tried to rally thousands of ordinary Americans to join her in donating more than just their annual tax dollars to help reduce the debt.

Fishburn hasn't sent in any checks since 1993. That year, she figured she had paid off her share of the national debt.

But Uncle Sam still will take your money if you want to send it along via snail mail.

Or you now can donate online at Pay.gov, making your gift either through a direct debit from a bank account or by charging it to a credit card.

If you opt for the plastic payment, though, please be sure to pay off that personal charge in full as soon as you get your credit card bill. There's just something wrong about people going into interest-accruing personal debt to help pay off our federal debt.

And however you contribute extra to the U.S. Treasury, if you itemize on your tax return, be sure to claim that amount as a charitable deduction.

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