‘Tis The Season For Charitable Tax Deductions 2019

I’ve donated 10% of my net income each year since 2016. It’s my “secular tithe.” Here are links to my 2017 and 2018 posts.

In 2019 we donated 10% of our joint net income (whereas in previous years, it was just 10% of mine). Because we’ll be subject to the AMT this tax cycle– exercised my ISO’s from previous employer– I considered doubling up our donations and get a head start on 2020 contributions to reduce our tax bill. Also, “prepaying” my balance would be optimal for tax optimization purposes due to the Republican’s new law. However, that’d leave us with little cash on hand, especially after my bout of unemployment, so I decided against it.

In addition to our direct contributions, my new employer has charitable matching up to $2,000, so I got that for one of my environmental picks.

Unlike previous years when I’ve used donation season to cash in on credit card bonuses, my churning days are more or less over: banks pretty much won’t approve me for new cards anymore. Husband is not interested in it either, le sigh. This means we’ll be feeling the effects of donations on our wallets more directly than in the past, but that’s okay too.

Here are the areas we donated to in 2018 and 2019:

We don’t plan at the beginning of the year how much we’ll donate to each area, but we think this is more or less a decent reflection of my values.

Here are the organizations represented in each bucket:

• Food Security. This is for the small, local food rescue organization that donates fruits and vegetables to seniors, people with disabilities, and other food programs in our area. This is money I feel “proudest” to donate to each year (see: my deep emotional connection with food).
• Immigration. Lots of money to RAICES because we as a country continue to jail and torture migrants in droves. Honestly, I don’t understand why the press continues to fuck around about the internal politics of impeachment when people are literally dying under ICE custody. I am deeply ashamed for how impotent I feel on this issue. Money doesn’t feel like enough.
• Environment. This is split between National Resource Defense Council, Rainforest Alliance, Sierra Club, and Green Wave. My interest is turning away from litigation and lobbying initiatives to direct action and climate change mitigation and resiliency. I imagine this to turn more sharply that way in 2020.
• Criminal Justice. Local (state) bail fund and two local charities focusing on justice for incarcerated LGTBQ+ folks, women, and families.
• Civil Rights. This is all going to the ACLU.

What we didn’t donate to this year:

• Political organizations. ActBlue will probably see a lot of donations from us in 2020, though.

What is your charitable giving philosophy? How much did you donate in 2019 and to what organizations? 

‘Tis The Season For Charitable Tax Deductions 2018

Since 2016, I’ve made the commitment to donate 10% of my net income each year. I do 10% because I grew up around very religious folk and felt like, though I’m not religious myself, I wanted to have something akin to a secular tithe. An amount that felt “moral” but not like I was giving away the farm. Something that was just the right amount of painful. Here is a link to my 2017 post.

In 2018 we continued to donate 10% of my net income, but not our joint income (though we will be contributing based on joint in 2019). We donated much more in 2017 than in 2018 because I “prepaid” my balance for tax optimization purposes due to the Republican’s new law. However, we did get our wedding guests to donate a few thousand dollars to our favorite charities rather than buy us expensive presents, which is not reflected in the below numbers.

Here are the areas we donated to in 2017 and 2018:

We don’t plan at the beginning of the year how much we’ll donate to each area, but we think this is more or less a decent reflection of my values. Note that we donated much more in 2017 than in 2018 because I “prepaid” my balance for tax optimization purposes due to the Republican’s new law.

Here are the organizations represented in each bucket:

• Food Security. This is for the small, local food rescue organization that donates fruits and vegetables to seniors, people with disabilities, and other food programs in our area. This is money I feel “proudest” to donate to each year (see: my deep emotional connection with food).
• Immigration. Lots of money to RAICES because we as a country continue to jail and torture migrants in droves. Honestly, I don’t understand why the press continues to fuck around about the internal politics of the administration when children are literally dying under ICE custody. I am deeply ashamed for how impotent I feel on this issue. Money doesn’t feel like enough.
• Environment. I used to divvy this bucket up amongst a lot of different environmental advocacy groups, but nowadays I just dump it all to the National Resource Defense Council.
• Criminal Justice. Local (state) bail fund.
• Civil Rights. Local LGBTQ+ advocacy organization.

What we didn’t donate to this year:

• Brother’s education. He graduated and while I gave him a little money to celebrate that, there are no more tuition/room/board etc payments going forward. Woohoo!
• Political organizations. I feel somewhat guilty about this but, honestly, every time I thought about donating for the 2018 cycle I kept thinking (1) Dems already had landslide levels of funding and (2) the money would be better put to use targeting migrant issues. So that’s what happened there.

What is your charitable giving philosophy? How much did you donate in 2018 and to what organizations? 

Tax Optimization and Charitable Giving

How are we reacting to the new Republican tax law?

Well, I’ve crunched the numbers and my partner and I will be around $3-4k short of the new standard deduction, not including charitable contributions. This gap will widen over time as we pay down our mortgage and our interest deduction declines.

Since we plan to continue donating 10% of our net income, we can pretty easily surpass this $3-4k gap each year if we give as normal. But it would be more tax efficient to bunch our giving so that we give the same amount on average, but only every other year. Applying such a strategy would net us an average of $385 in greater tax refunds every year (growing slightly over time). Not a life changing amount, but not chump change either.

The big downside to such a plan is that we would, in essence, be “delaying” charitable donations which could be well used by our favorite institutions sooner than later. I put a pretty high discount rate on donations– I think $50 to a cause today is worth way more than $50 to a cause a year from now. Because who knows what the world will look like a year from now. Plus, if we lived our whole lives around financial optimization, we wouldn’t be giving this much to begin with.

Alternatively, we could “prepay” charitable donations a year early. Which, if you believe the stock market will continue its bonanza of 20% annual increases, means we’ll be missing on non-trivial market gains.

So where does that leave us? To bunch or not to bunch?

Since we “prepaid” a lot of our charitable obligation for this year, I am inclined to donate the remainder of this year’s charitable obligation and then “prepay” next year’s obligations into a donor advised fund. From an efficient giving standpoint, I still think it is better to just donate the extra to charity now and eschew the DAF altogether. But from a mental accounting standpoint, having the money under my “advisement” (read: basically under my control except legally?) is strangely comforting. Plus, setting up a charitable foundation in anticipation for our wedding might be nice. Have our guests donate into our charitable pot rather than buying us a toaster oven we’ll never use.

Are you changing your tax strategy due to the new tax law? Will it affect your charitable giving?