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Best Way to Tithe

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  • #16
    Originally posted by abds View Post
    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?
    Render unto God that which is God’s and render unto Caesar that which is Caesar’s.

    In this case, Caesar says he won’t hit you with capital gains tax if you put the money into a donor advised fund. Your religious institution still gets the full $50,000. $50K sounds like 10% of $500K to me, and you’ve fulfilled your secular financial obligations to the taxman.

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    • #17
      If you have appreciated stocks and wouldn’t ordinarily itemize w/o your donations, a DAF is an excellent way to bunch contributions and take maximum advantage of the standard deduction, which $25,100 in 2021. Assuming you can afford to do so and/or have sufficient appreciated investments, gift several years at once and take the standard deduction in years you d/n donate to the DAF. Obviously, tax planning is important to determine optimal gifts and timing.

      Donations of appreciated property can be deducted up to 30% of AGI, with any remaining carried forward up to 5 yrs. Under the CARES Act, cash donations can be deducted up to 100% (60%, otherwise) of AGI in 2021.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #18
        We itemize.

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        • #19
          Originally posted by Hank View Post

          Render unto God that which is God’s and render unto Caesar that which is Caesar’s.

          In this case, Caesar says he won’t hit you with capital gains tax if you put the money into a donor advised fund. Your religious institution still gets the full $50,000. $50K sounds like 10% of $500K to me, and you’ve fulfilled your secular financial obligations to the taxman.
          I’m not judging. I don’t give 10%. I give a set amount every year to my church.

          Based on past posts, others here seem to be more strict about tithing so I’m genuinely curious if those folks see the end goal as “the church gets $x,000” and “I sacrifice $x,000” as equal. Because via appreciated shares in a DAF they aren’t equal.

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          • #20
            Originally posted by abds View Post

            I’m not judging. I don’t give 10%. I give a set amount every year to my church.

            Based on past posts, others here seem to be more strict about tithing so I’m genuinely curious if those folks see the end goal as “the church gets $x,000” and “I sacrifice $x,000” as equal. Because via appreciated shares in a DAF they aren’t equal.
            Interesting. Is tithing dependent on tax law from a religious perspective?
            10% of gross or taxable income. I would not argue with anyone’s personal choice.

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            • #21
              Originally posted by Tim View Post
              Interesting. Is tithing dependent on tax law from a religious perspective?
              10% of gross or taxable income. I would not argue with anyone’s personal choice.
              I’ve gone back and forth on this. I think you can make a compelling argument either way. I choose to give on take home for a couple reasons:
              1) Give into Cesar what is Caesar’s - to me, that says that that money is cesars, not mine.
              2) You tithe on your increase. What goes to the government is not my increase, it is the governments increase.
              3) Logic - if federal tax rates were 90%, I can’t imagine a 10% tithe of gross is what would be expected.

              All that to say, I tithe on my take home pay and tax returns and will tithe on my pretax accounts when I withdraw.

              Sorry to derail, Mods - I’m trying to explain my rationale in earnest, so please don’t shut this down. Christian theological discussions generally fall into one of three categories. There are those that are non-negotiable - these are what divide Christians from non-Christians. For example, Jesus being the son of God. These are table stakes for what it means to be Christian. There are subsequently second order theological questions that divide denominations. People of one persuasion understand how others come to a certain viewpoint, but disagree with it. For example, baptisms of children vs. only adults - Christians disagree among each other (sometimes strongly), but acknowledge others who disagree are still Christians and often work alongside each other on mutual tasks (e.g. ministry to the poor). There are finally third order questions which people within a church can disagree upon and there is not a direct, compelling biblical argument demonstrating one is correct.

              I believe tithing is a third order issue. It is clearly directed by the Bible, but there aren’t super specific instructions on how it should be done - and definitely not something churches would divide over.




              So if I already itemize and don’t (yet) have the cashflow to do a multi year donation, is a DAF worth doing, or should I wait a couple years until my taxable account and cashflow are better?

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              • #22
                VentAlarm, if you would take the std deduction w/o charitable contributions, bunching donations to a DAF w/b helpful.
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #23
                  This is probably a dumb resident-level question. Just trying to understand for my future earnings. Lets say I make 400k/year one day and I intend to donate 10%/40k. Should I definitely itemize at that point based on 40k > 25k (standard deduction) alone? I understand there are other itemizing categories, but trying to oversimplify for my understanding. Do the majority of WCI attendings itemize?

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                  • #24
                    Originally posted by DynamicHipScrew View Post
                    This is probably a dumb resident-level question. Just trying to understand for my future earnings. Lets say I make 400k/year one day and I intend to donate 10%/40k. Should I definitely itemize at that point based on 40k > 25k (standard deduction) alone? I understand there are other itemizing categories, but trying to oversimplify for my understanding. Do the majority of WCI attendings itemize?
                    Well, of course, you always want to take the higher deduction and itemizing is a fairly simple process. No way to know if the majority of attendings do so (I guess you could create a poll to get a sample) but I’d estimate the following, based on our client base of ~500:
                    • 30%-40% itemize due to mortgage interest
                    • 5% itemize due to charity, but minimum mortgage interest
                    • 10%-20% itemize using both (i.e. need both the get above the limit)
                    • 40%-45% don’t itemize because either they don’t have enough mortgage, they don’t own a house (we have one couple with ~$1.5M/yr AGI who rent), they’ve almost paid off their mortgage, or one of the previous and they are bunching donations
                    I am estimating this from home.
                    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #25
                      https://www.irs.gov/pub/irs-pdf/f1040sa.pdf
                      Read the form.
                      Taxes - limited to $10k, mortgage interest and charitable contributions are the big items. All is individual. If one has a significant mortgage, likely itemize because the RE taxes hits the $10k.

                      If you don't own a home, likely standard deduction.

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                      • #26
                        Originally posted by jfoxcpacfp View Post
                        VentAlarm, if you would take the std deduction w/o charitable contributions, bunching donations to a DAF w/b helpful.
                        I think I’d probably itemize either way. I’ll have to double check but between SALT and mortgage interest we’re at, if not over, 24k.

                        Thanks!

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                        • #27
                          Originally posted by chrisg202 View Post
                          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 at all! Funds placed in a DAF can be given to charities immediately. But if you are donating stocks to the DAF, you want to donate shares you’ve held for longer than a year (so the capital gains are classified as long-term rather than short term). And you can donate all kinds of things to a DAF: stocks, bonds, cash, real estate, artwork and other collectibles, etc. Obviously stocks, bonds, and cash are the fastest for the DAF to process.

                          (Clarification: when I refer to stocks and bonds I am including ETFs and mutual funds as well as individual stock shares and bond coupons.)

                          One advantage of donor advised funds that has not yet been mentioned in this thread is that they send your charity a check. Many smaller charities cannot handle direct donations of stocks or bonds, but they can all handle a check. So a donor advised fund is a way of allowing you to donate appreciated shares of stocks to charities you would otherwise have to give cash to.

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                          • #28
                            Originally posted by abds View Post

                            I’m not judging. I don’t give 10%. I give a set amount every year to my church.

                            Based on past posts, others here seem to be more strict about tithing so I’m genuinely curious if those folks see the end goal as “the church gets $x,000” and “I sacrifice $x,000” as equal. Because via appreciated shares in a DAF they aren’t equal.
                            I personally think either a set amount, 10% gross or 10% post-tax is fine. We gave less when we had less (when I was a resident we did 10% post-tax). We give more now. God didn’t love me less when I was a resident and He doesn’t love me more now.

                            I think the end goal of tithing is being generous. God wants us to do our best. Who cares what other people give? Personal finance is personal, and this is another example of that. Nobody can judge what is someone elses best.

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                            • #29
                              Originally posted by Tim View Post
                              Interesting. Is tithing dependent on tax law from a religious perspective?
                              10% of gross or taxable income. I would not argue with anyone’s personal choice.
                              Many years ago I heard a sermon on this very topic. Pastor didn’t take a stand on gross vs taxable but rather on attitude. Tithing should be the FIRST 10% and not the leftovers. The only one who truly knows is the donor and the Almighty. Personally I use a DAF but it’s not my place to judge how others contribute.

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                              • #30
                                I use a DAF through Schwab and love it. I alternate years itemizing and using the standard deduction. Its a great way to reduce cost basis on appreciated stock. I sell two years worth of charitable giving by donating stock while buying the same amount of the fund sold. I can spread that out over my year of itemizing and then I don't donate during the off year.

                                The DAF allows me to give to charitable causes when I want and gives me a lot of flexibility as to whether to give anonymously, with my wife's and my name, or with the name we have given to our charitable account. You can give to any 501(C)3 organization. There is an annual fee through Schwab, as I recall it was around $200. The only thing I don't like is that the fund I have my charitable funds invested in through Schwab has a 0.5 expense ratio. I think you can just park it in cash but I don't know the interest or fees associated with that option.

                                I also love how simple and quick it is to donate to a charity. If its one that you have given to before you can just click on "donate again" and specify the amount, it takes seconds. Its wonderful for tracking what you have given to and how much. I would never go back to sending personal checks to charities again. We are at the point in our lives and finances that we are giving 20% of our gross income, but we started out giving 10%.

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