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Best Way to Tithe

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  • Best Way to Tithe

    We tithe on my take home pay which is in the neighborhood of 17k/mo. I’ve always just paid monthly from cashflow. We itemize and I knock it off my AGI.

    My question is: Is there a more tax efficient means to give? I am vaguely aware that you can donate appreciate shares or give through a donor advised fund, but I’m not fully aware of all of the intricacies of either a DAF or donating appreciates holdings. I have no desire to put money in a DAF then let it grow for later as I feel this is not fulfilling the meaning of tithing, rather I would like to simply continue making monthly contributions at a rate of 1/10th of my take home pay.

    My suspicion is that I should be donating appreciated shares from my taxable account. Do any of y’all do this? Is it really that beneficial if you donate ~20k/y and have a relatively small taxable account? FWIW, my taxable account is 100% VTSAX. Any significant rules I need to know about/any resources you would point me to?

    As always, thanks.

  • #2
    We tithe from our DAF. We put in a lump sum and plan to tithe from our DAF for several years.

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    • #3
      Originally posted by ObgynMD View Post
      We tithe from our DAF. We put in a lump sum and plan to tithe from our DAF for several years.
      If you didn’t have a lump sum to do that with, would you still use a DAF? Could you use it as a clearing house, or would there be benefit to that?

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      • #4
        If you put cash into a DAF, you can deduct the full dollar amount from your taxable income. You could just put the amount you plan to donate per month into your DAF, donate from your DAF, and get the tax deduction when you file. You can deduct up to the entire value of your taxable income.

        I also learned that if you donate appreciated shares, you can only deduct up to 1/3rd the value of your taxable income (and any extra rolls over until the next year).
        Last edited by ObgynMD; 11-13-2021, 06:45 PM.

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        • #5
          we do put aside 10% of our income for charity.... around 30K/yr
          We donate to causes and individuals that cannot accept stocks. Some of our donation go to orphans overseas, so cash is the only way to help them.
          Using a DAF is a good idea, however I heard that the money has to be in the account for a year before you can withdraw from it.

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          • #6
            Originally posted by chrisg202 View Post
            we do put aside 10% of our income for charity.... around 30K/yr
            We donate to causes and individuals that cannot accept stocks. Some of our donation go to orphans overseas, so cash is the only way to help them.
            Using a DAF is a good idea, however I heard that the money has to be in the account for a year before you can withdraw from it.
            Not sure if it is broker specific, but a fidelity DAF can be funded and used immediately without any issues. It’s easy to set up recurrent donations as well.

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            • #7
              Originally posted by ObgynMD View Post

              Not sure if it is broker specific, but a fidelity DAF can be funded and used immediately without any issues. It’s easy to set up recurrent donations as well.
              So do I just move appreciated shares into the DAF, tithe from the DAF, then put the same amount into my taxable?

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              • #8
                Is calculating the amount of your tithing by the value of appreciated stock really in the spirit of tithing?

                If you make $500,000, tithe 10%, and donate $50,000 a year from your checking account, you’re donating $50,000.

                If you donate $50,000 of VTSAX that has a basis to you of $25,000, since you’re avoiding capital gains, that money has a value of somewhere around $45,000.

                Is that really in the spirit of tithing? Do you feel like the big guy knows you’re pulling a fast one on him for some tax benefits? Or do you adjust your donation higher?

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                • #9
                  Definitely should consider donating appreciated stock to a DAF , tithing from DAF, and then contributing your income back to taxable. It's a way of resetting the tax basis in your taxable investments. Just remember you can only deduct the value of the appreciated stock if you have held over one year.

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                  • #10
                    Originally posted by abds View Post
                    Is calculating the amount of your tithing by the value of appreciated stock really in the spirit of tithing?

                    If you make $500,000, tithe 10%, and donate $50,000 a year from your checking account, you’re donating $50,000.

                    If you donate $50,000 of VTSAX that has a basis to you of $25,000, since you’re avoiding capital gains, that money has a value of somewhere around $45,000.

                    Is that really in the spirit of tithing? Do you feel like the big guy knows you’re pulling a fast one on him for some tax benefits? Or do you adjust your donation higher?
                    The Bible says to tithe on your gain. I tithe on my take home pay. I also feel like the government does an abysmal job of managing money and I think it is wise to minimize what I give to them in my taxes through all available legal means. I subsequently tithe on any tax refund I get.

                    Back to my question: is it worth the hassle of going through additional steps on tithing? If so, what is the best means to do so?

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                    • #11
                      Originally posted by abds View Post
                      Is calculating the amount of your tithing by the value of appreciated stock really in the spirit of tithing?

                      If you make $500,000, tithe 10%, and donate $50,000 a year from your checking account, you’re donating $50,000.

                      If you donate $50,000 of VTSAX that has a basis to you of $25,000, since you’re avoiding capital gains, that money has a value of somewhere around $45,000.

                      Is that really in the spirit of tithing? Do you feel like the big guy knows you’re pulling a fast one on him for some tax benefits? Or do you adjust your donation higher?
                      Didn't the bible say donating out of a DAF doesn't count?

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                      • #12
                        Originally posted by FIREshrink View Post
                        Definitely should consider donating appreciated stock to a DAF , tithing from DAF, and then contributing your income back to taxable. It's a way of resetting the tax basis in your taxable investments. Just remember you can only deduct the value of the appreciated stock if you have held over one year.
                        Thanks. That’s super helpful. Other than the one year requirement, anything other i’s to dot or y’all to cross? Also, does it require any additional steps for the recipient?

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                        • #13
                          I do not have a DAF but am learning about it. I am still learning and early in the process but I need to be more organized with giving. I think I am very fortunate and will probably give away a lot before and after I die.

                          I think giving to those in need is wonderful.

                          I have inherited zero and think money and family are complicated.

                          I wonder if giving away money to good causes rather than to family both before after death is the best use of money.

                          Anyway, I think a DAF or any other organized intelligent method of giving money that minimizes taxes is probably a good thing (I think people, not governments should decide how to give their money).

                          https://www.physicianonfire.com/the-...und-a-win-win/

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                          • #14
                            Originally posted by VentAlarm View Post

                            Thanks. That’s super helpful. Other than the one year requirement, anything other i’s to dot or y’all to cross? Also, does it require any additional steps for the recipient?
                            Donor gets straight cash while you can contribute cash, appreciated stocks, or really anything, like real estate, to the DAF. It's pretty awesome. Also totally simplifies record keeping come tax time as you're making just a single donation.

                            We typically transfer appreciated securities in December, then make all our giving from the DAF ("grants") over the next twelve months. Then repeat.

                            If your other itemized deductions do not exceed the standard deduction, you can bunch your DAF contributions and take the standard deduction every other year. For example, if your annual donation is $21k, and your other deductions ( mortgage interest plus SALT etc ) are only $20k, you could donate $42k in year 1, which gives you itemized deductions of $62k, then in year 2 take the standard deduction of $25,100 = $87,100 over two years - instead of $41k*2= $82k otherwise, thereby reducing your taxable income by $5000 over two years. The DAF smooths the cash flow to your charities, so it's all the same to them.

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                            • #15
                              Do you itemize? Are you actually getting a tax break on your donations? If you lump 2 years worth into a daf you get more bang for your buck. Either it makes it cheaper for you or it lets you donate more. Either way the charity gets the money.

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