Will you donate less to Charity?

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livesoft
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Will you donate less to Charity?

Post by livesoft » Sat Dec 23, 2017 10:26 pm

First, we have had a DAF for many years and donate to charity both from the DAF and with cash throughout the year. Our DAF is funded from deductible share gifts to avoid capital gains taxes, too.

However, the tax law change will mean that our usual level of giving will not be deductible anymore and that creates a behavioral tinge for me (but probably not my spouse). Sure, we will be able to avoid long-term capital gains by continual donations, but the added kicker of reducing taxable income will no longer be there.

So one way out is to up our game and increase our donations while still bunching major gifting into every other year.

It seems many of you are trying to get DAFs and contributions going here at the end of 2017, but does that mean less giving to charities over the next few years? Have you thought about that?
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Re: Will you donate less to Charity?

Post by CaliJim » Sat Dec 23, 2017 10:46 pm

i'll probably continue giving at about the same rate, but I give only about about 1.5% of income rate. we do not have a DAF.
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White Coat Investor
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Re: Will you donate less to Charity?

Post by White Coat Investor » Sat Dec 23, 2017 10:57 pm

No, plan to give the same. But we also give enough that itemized deductions are more than the standard in most years.
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Re: Will you donate less to Charity?

Post by NYC_Guy » Sat Dec 23, 2017 11:00 pm

With the repeal of the Pease limitation, my charitable donations just got more valuable. And they are more valuable to me next year. So my 2017 annual charity checks are going out in 2018 (instead of next week).
Last edited by NYC_Guy on Sat Dec 23, 2017 11:06 pm, edited 1 time in total.

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GerryL
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Re: Will you donate less to Charity?

Post by GerryL » Sat Dec 23, 2017 11:03 pm

I'm thinking I will probably double up on moving shares of company stock into my DAF every other year and keep my annual giving from that source about the same. I'll see how I feel when I start doing QCDs in 2019. I could conceivably do all my giving with QCDs eventually if my RMDs get too big, but my former employer offers a match for the non-QCD donations, which is a motivation to give up to the top of the match.

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Re: Will you donate less to Charity?

Post by letsgobobby » Sat Dec 23, 2017 11:07 pm

Still itemizing, so no change.

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Re: Will you donate less to Charity?

Post by Lars_2013 » Sat Dec 23, 2017 11:12 pm

I'm among the many folks who will no longer benefit from itemizing in 2018 and the following several years, at least. I've set up and am pre-funding a DAF with 4-5 years worth of charitable donations precisely because I don't want to give less to charity in future years and know that many of the small charities that I support are not sophisticated enough to "spread" a one-time 2017 donation across 4-5 years even if I tell them I won't be giving my usual amount in future years.

In other words, I plan to give at least as much in future years as this year, but some of those donations will come from my DAF rather than from my checking account. I will not be giving as much from my checking account in the next few years, since I'm bunching the donations in this year to get the advantage of itemizing.

For context, I donate about 6% of AGI in a typical year.

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Re: Will you donate less to Charity?

Post by DorothyB » Sat Dec 23, 2017 11:15 pm

I plan to continue my current level of giving, but fund most of it in odd numbered years and use standard deduction in even numbered years.

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Re: Will you donate less to Charity?

Post by SimpleGift » Sat Dec 23, 2017 11:18 pm

livesoft wrote:
Sat Dec 23, 2017 10:26 pm
It seems many of you are trying to get DAFs and contributions going here at the end of 2017, but does that mean less giving to charities over the next few years? Have you thought about that?
Since we have "enough" in retirement and our portfolio is nearly all taxable, we rebalance by donating appreciated shares directly to our Vanguard Donor Advised Fund. As this rebalancing is only done after years with large stock run-ups, our DAF contributions tend to be large lump sums of appreciated shares — and I expect we will still be itemizing in those years, even with the new higher standard deductions.

Since all of our annual charitable giving then comes from the DAF, I don't see the new tax law changing the level or timing of our future donations.
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Re: Will you donate less to Charity?

Post by trueblueky » Sat Dec 23, 2017 11:19 pm

I will use qualified charitable distribution of RMD when I reach 70.5. Until then, I will likely bunch deductions (charitable donations, property tax, state sales tax) every other year, taking care to purchase cars in an itemized year.

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Re: Will you donate less to Charity?

Post by fposte » Sat Dec 23, 2017 11:38 pm

I will probably end up with a standard deduction. I therefore just opened a DAF and will probably add another charity to my pretax payroll donations next year.

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Re: Will you donate less to Charity?

Post by MnD » Sat Dec 23, 2017 11:49 pm

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Re: Will you donate less to Charity?

Post by desiderium » Sat Dec 23, 2017 11:57 pm

No decrease, just rearranging the pieces. Will bunch 5 years worth of gainers to DAF this year, continue miscellaneous smaller donations throughout the year. Down the road, will again look to the most tax advantaged strategy for continuing our giving.

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Re: Will you donate less to Charity?

Post by Ragnoth » Sun Dec 24, 2017 12:05 am

I'll probably give a little less.

I don't have any charities that I'm particularly fond of, but I try to give some money to places like my alma mater or the Wikimedia foundation during their funding drives. It sounds kinda callous, but the deductibility is always part of how I rationalize/justify the expense. When push comes to shove, I can see myself trimming those random $100 donations throughout the year to $50-75 instead.

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Re: Will you donate less to Charity?

Post by student » Sun Dec 24, 2017 12:09 am

It does not affect me as I only give a small amount to the university that I work for every year. I no longer give yearly donations to other charities as I am saving to make a larger donation for a project.

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Re: Will you donate less to Charity?

Post by El Greco » Sun Dec 24, 2017 12:17 am

I don't think I will be giving less, but then again, I don't think I will be giving more, either. As I will be taking the standard deduction, and not be able to deduct charitable contributions, I don't think I will be as motivated to "up my game". I think it was a big mistake to not allow charitable deductions on top of the standard deduction. I think this was very short-sighted and will hurt charities greatly.

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Re: Will you donate less to Charity?

Post by crumbone » Sun Dec 24, 2017 12:27 am

El Greco wrote:
Sun Dec 24, 2017 12:17 am
I don't think I will be giving less, but then again, I don't think I will be giving more, either. As I will be taking the standard deduction, and not be able to deduct charitable contributions, I don't think I will be as motivated to "up my game". I think it was a big mistake to not allow charitable deductions on top of the standard deduction. I think this was very short-sighted and will hurt charities greatly.
Agree completely. As much as I'd like to believe that giving either time or money to make the world a better place is a good in and of itself, people do respond to incentives. Before, we incentivized charity, now we don't. Contributions will inevitably be lower. I'll still give, of course, but will I give quite as much? I just don't know.

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Re: Will you donate less to Charity?

Post by PhysicianOnFIRE » Sun Dec 24, 2017 12:41 am

NYC_Guy wrote:
Sat Dec 23, 2017 11:00 pm
With the repeal of the Pease limitation, my charitable donations just got more valuable. And they are more valuable to me next year. So my 2017 annual charity checks are going out in 2018 (instead of next week).
That's not how the Pease limitation works. It's a 1% to 1.2% surtax on income disguised as a limitation on itemized deductions. You may want to reconsider as you're quite possibly in a lower marginal income tax bracket next year.

I'll be giving more in future years, but via our DAF and very little directly. I've decided to take my tax deductions up front and donate slowly over many years. This month, I topped off our DAF(s) to my goal of 10% of our retirement nest egg. I may add to to our DAF accounts later on, and I would do it as a lump sum later on.

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libralibra
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Re: Will you donate less to Charity?

Post by libralibra » Sun Dec 24, 2017 12:53 am

crumbone wrote:
Sun Dec 24, 2017 12:27 am
El Greco wrote:
Sun Dec 24, 2017 12:17 am
I don't think I will be giving less, but then again, I don't think I will be giving more, either. As I will be taking the standard deduction, and not be able to deduct charitable contributions, I don't think I will be as motivated to "up my game". I think it was a big mistake to not allow charitable deductions on top of the standard deduction. I think this was very short-sighted and will hurt charities greatly.
Agree completely. As much as I'd like to believe that giving either time or money to make the world a better place is a good in and of itself, people do respond to incentives. Before, we incentivized charity, now we don't. Contributions will inevitably be lower. I'll still give, of course, but will I give quite as much? I just don't know.
By that argument, raising tax rates should increase charitable giving, right? But then people would just say they have less money so will give less! Both these arguments cannot be true.

I'd say if people are saving on taxes, then they have more money to give, not less.

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Re: Will you donate less to Charity?

Post by Sheepdog » Sun Dec 24, 2017 1:13 am

I have never given to charity because of federal tax deductions. It was a nice benefit, but that was not the reason. I give because of needs. However, I do give to two state universities because of a special Indiana state deduction and that is I can give up to $400 each year to Indiana state colleges or universities and reduce my state tax by $200. If I didn't receive that $200 I probably would not have given to them.
I will not give less from this point on because of the recent tax legislation. To the contrary, I will give a higher amount each year as I have in the last 10 years in retirement because the needs are so great and I can afford to do so.
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Re: Will you donate less to Charity?

Post by El Greco » Sun Dec 24, 2017 1:15 am

by libralibra » Sun Dec 24, 2017 12:53 am


By that argument, raising tax rates should increase charitable giving, right? But then people would just say they have less money so will give less! Both these arguments cannot be true.
You're talking idealism. We're talking human nature. I'll wager any amount of money that human nature trumps idealism when the subject is reality. I am quite confident that by effectively eliminating charitable deductions for millions of taxpayers, there will be significantly less contributions made. As a matter of fact my wife and I just had dinner with the President of a well-known charity last night. She expressed great concern that donations would be severely curtailed in the future due to the new rules.
Last edited by El Greco on Sun Dec 24, 2017 1:23 am, edited 1 time in total.

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Re: Will you donate less to Charity?

Post by crumbone » Sun Dec 24, 2017 1:16 am

libralibra wrote:
Sun Dec 24, 2017 12:53 am
crumbone wrote:
Sun Dec 24, 2017 12:27 am
El Greco wrote:
Sun Dec 24, 2017 12:17 am
I don't think I will be giving less, but then again, I don't think I will be giving more, either. As I will be taking the standard deduction, and not be able to deduct charitable contributions, I don't think I will be as motivated to "up my game". I think it was a big mistake to not allow charitable deductions on top of the standard deduction. I think this was very short-sighted and will hurt charities greatly.
Agree completely. As much as I'd like to believe that giving either time or money to make the world a better place is a good in and of itself, people do respond to incentives. Before, we incentivized charity, now we don't. Contributions will inevitably be lower. I'll still give, of course, but will I give quite as much? I just don't know.
By that argument, raising tax rates should increase charitable giving, right? But then people would just say they have less money so will give less! Both these arguments cannot be true.

I'd say if people are saving on taxes, then they have more money to give, not less.
Sure, but they also have more money to spend (or save) for any purpose at all. Itemizing specifically incentivizes donation, by making $1 of donations worth more than $1 pretax. Less itemizing means less direct financial incentive to donate.

Some of this is economic, some it probably behavioral, but before it felt not just good (again, it is still very very good) but smart to donate.

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Re: Will you donate less to Charity?

Post by OldSport » Sun Dec 24, 2017 1:24 am

DorothyB wrote:
Sat Dec 23, 2017 11:15 pm
I plan to continue my current level of giving, but fund most of it in odd numbered years and use standard deduction in even numbered years.
This is a good idea. I will likely do the same. If they didnt limit the SALT deduction to $10k, I could still itemize.

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Re: Will you donate less to Charity?

Post by Misenplace » Sun Dec 24, 2017 1:34 am

I convinced my spouse to load up our DAF since it doesn’t look like we will be itemizing under the new tax plan. We will put about 5-7 years of donations into it.

It does look bad for charities under this plan, given ‘human nature’.

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Re: Will you donate less to Charity?

Post by OldSport » Sun Dec 24, 2017 1:35 am

What is a DAF? When does it make sense to use one?

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Re: Will you donate less to Charity?

Post by Ragnoth » Sun Dec 24, 2017 1:35 am

libralibra wrote:
Sun Dec 24, 2017 12:53 am
crumbone wrote:
Sun Dec 24, 2017 12:27 am
El Greco wrote:
Sun Dec 24, 2017 12:17 am
I don't think I will be giving less, but then again, I don't think I will be giving more, either. As I will be taking the standard deduction, and not be able to deduct charitable contributions, I don't think I will be as motivated to "up my game". I think it was a big mistake to not allow charitable deductions on top of the standard deduction. I think this was very short-sighted and will hurt charities greatly.
Agree completely. As much as I'd like to believe that giving either time or money to make the world a better place is a good in and of itself, people do respond to incentives. Before, we incentivized charity, now we don't. Contributions will inevitably be lower. I'll still give, of course, but will I give quite as much? I just don't know.
By that argument, raising tax rates should increase charitable giving, right? But then people would just say they have less money so will give less! Both these arguments cannot be true.

I'd say if people are saving on taxes, then they have more money to give, not less.
You appear to be conflating two different things. There is a wealth effect ("I have more money, so I give more"), as well as a distortionary effect by letting people deduct contributions ("Although I gave $100 to charity, I only had to give up $50 I would otherwise spend on other things").

Usually these forces push people in the same direction. Changes in the tax code are one of the rare circumstances where you have a tension between the two.

That said, both of these are "true" reasons why a person might give more/less to charity. Personally, I'm skeptical that a 2-3% increase in total take-home pay would produce a net increase in charitable giving for most of the people losing out on the deductibility. But a lot of it will boil down to a person's individual temperament and level of giving relative to their income.
Last edited by Ragnoth on Sun Dec 24, 2017 1:50 am, edited 1 time in total.

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Misenplace
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Re: Will you donate less to Charity?

Post by Misenplace » Sun Dec 24, 2017 1:49 am

OldSport wrote:
Sun Dec 24, 2017 1:35 am
What is a DAF? When does it make sense to use one?
A DAF is short hand for a donor advised fund. You can look these up in the WIKI and on the Vanguard and Fidelity websites. I think Ron Lieberman also had an article in the last day or 2 on The NY Times regarding how now was the time to do one.

Essentially, you can easily give money and/or appreciated funds to the DAF. It is a donation that is deductible in full at the time you give it to the DAF- you can never get it back. But you can direct the investments (Boglehead style), and recommend donations to the charity of your choice in future years. In the past it has been useful for people who like to bunch deductions into every other year, and then take the standard deduction in the odd years.

For people who have always itemized, but won’t under the new tax plan, the next 7 days is the time to load it up so as to get the itemized deduction for 2017.

Any questions after looking at these references, just ask.

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Re: Will you donate less to Charity?

Post by curmudgeon » Sun Dec 24, 2017 2:10 am

I wasn't necessarily expecting to itemize over the next few years, so I loaded up the DAF with about six years worth of contributions in my last full year of working even before the new tax law. I don't expect anything different in our donations over the next few years. In the future, I may do an "every five years" large DAF donation, combining it with any other deduction bunching I can fit in.

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Re: Will you donate less to Charity?

Post by libralibra » Sun Dec 24, 2017 2:14 am

El Greco wrote:
Sun Dec 24, 2017 1:15 am
by libralibra » Sun Dec 24, 2017 12:53 am


By that argument, raising tax rates should increase charitable giving, right? But then people would just say they have less money so will give less! Both these arguments cannot be true.
You're talking idealism. We're talking human nature. I'll wager any amount of money that human nature trumps idealism when the subject is reality. I am quite confident that by effectively eliminating charitable deductions for millions of taxpayers, there will be significantly less contributions made. As a matter of fact my wife and I just had dinner with the President of a well-known charity last night. She expressed great concern that donations would be severely curtailed in the future due to the new rules.
Before this new legislation, about 70% already took the standard deduction. I assume many of them still donated to causes they believed in even though it didn't cut their taxes. Doubling the standard deduction won't affect their behavior. Similarly, people who donate way beyond 24k would still itemize and so should not be affected either.

The people in the middle are the only ones I can see being affected by this "human nature" element. However, what I'm saying is that they are being given the tax cut regardless of whether they donate or not (by taking the 24k deduction). They are not losing anything or getting less value by continuing to donate.

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Re: Will you donate less to Charity?

Post by daveydoo » Sun Dec 24, 2017 2:21 am

livesoft wrote:
Sat Dec 23, 2017 10:26 pm

It seems many of you are trying to get DAFs and contributions going here at the end of 2017, but does that mean less giving to charities over the next few years? Have you thought about that?
A lot. Spouse is pretty generous and this has been our pattern/habit for many years. We front-loaded a DAF earlier this year, mostly by coincidence, with ~ 5+ years worth of giving. Not sure what we will do after that but at least it will give me a lot of time to model the tax impact either way. I think this is one of the awful consequences of this ill-thought-out plan. Disincentivizes donations from state-income-tax states, and to the causes they support. Maybe it was carefully thought out after all.
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Re: Will you donate less to Charity?

Post by whodidntante » Sun Dec 24, 2017 2:25 am

The non-profit/charity sector in the USA is larger than in other countries, even after adjusting for the size of our economy. It's not that Americans are more generous IMO. It's that we made a tradeoff. Government provides fewer and thinner services, and we delegate more to the non-profit sector. People see needs all over the place and chose to close the gap.

I've been itemizing for many years now. I will not itemize every year now. The deductibility of my donations is not the only reason I do it, and some of my giving will continue regardless. But I have to admit that I will look harder at my donations, now that there will be years where I do not get a tax benefit.

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Re: Will you donate less to Charity?

Post by catdude » Sun Dec 24, 2017 3:36 am

The Washington Post has a story on this subject....

https://www.washingtonpost.com/business ... 0eb5246dee
Taylor worries the tax bill will force United Way to change whom it targets for fundraising.

“We don’t have any choice but to look to those higher-end donors more. We have to,” Taylor said. “But it’s not really what we want to do, and it’s not really healthy for the charitable sector in America.”
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Re: Will you donate less to Charity?

Post by A440 » Sun Dec 24, 2017 6:46 am

We will continue to tithe to our church. 10% of our income is nothing when compared to all the blessings we have received. (Malachi 3:10)

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Re: Will you donate less to Charity?

Post by birdog » Sun Dec 24, 2017 7:20 am

Actually looking to give more this year. (I’m working towards 10% but not there yet.) IMO, the act of giving is primary while the act of maximizing a deduction (while still important to proper money management) is secondary. I don’t want to let the secondary dictate the primary. Besides, you only really get to keep that which you give away.

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Re: Will you donate less to Charity?

Post by aristotelian » Sun Dec 24, 2017 7:39 am

We overfunded our DAF this year to cover donations for the next few years. Our actual donation level won't change.

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Re: Will you donate less to Charity?

Post by gd » Sun Dec 24, 2017 7:40 am

Yes. Charitable deductions only benefited me in a few years, where I set up unusually large donations and then bunched other factors such as property taxes. But that will not happen now.

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Re: Will you donate less to Charity?

Post by oldcomputerguy » Sun Dec 24, 2017 7:44 am

For the last couple of years our itemized deductions did not exceed the standard deduction anyway, so I don't see a big behavioral change coming on that front. That being said, no, our donating to charity rests less on wanting to reduce taxable income and more on wanting to help causes we believe in, at least at this point in our lives.
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Re: Will you donate less to Charity?

Post by Sheepdog » Sun Dec 24, 2017 7:44 am

birdog wrote:
Sun Dec 24, 2017 7:20 am
Actually looking to give more this year. (I’m working towards 10% but not there yet.) IMO, the act of giving is primary while the act of maximizing a deduction (while still important to proper money management) is secondary. I don’t want to let the secondary dictate the primary. Besides, you only really get to keep that which you give away.
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Re: Will you donate less to Charity?

Post by Sheepdog » Sun Dec 24, 2017 7:47 am

oldcomputerguy wrote:
Sun Dec 24, 2017 7:44 am
For the last couple of years our itemized deductions did not exceed the standard deduction anyway, so I don't see a big behavioral change coming on that front. That being said, no, our donating to charity rests less on wanting to reduce taxable income and more on wanting to help causes we believe in, at least at this point in our lives.
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Re: Will you donate less to Charity?

Post by chw » Sun Dec 24, 2017 7:53 am

Plan to give about the same. Retired this year, and with expected lower taxable income in future years, we were considering a DAF this year- the new tax law made it a no-brainer.

We funded the DAF with about 10 years of typical charitable giving from appreciated stock in a taxable account. Depending on returns from DAF, we may actually increase our contributions.

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Re: Will you donate less to Charity?

Post by annielouise » Sun Dec 24, 2017 8:02 am

We put about 5 years into our DAF and will continue our donations from that at the same rate (about 5% of AGI). We will probably take more "gifts" with the donations we do outside the DAF (the kind that give us membership and/or benefits) since we won't be deducted them.

My experience as a tax accountant is that many people think they get a tax advantage even if they aren't actually itemizing. They also think the donations make a bigger tax difference than in reality. So, I believe it will make a difference for charitable giving overall. I also think the 1% who "don't give to charity much because I pay too much in taxes" - I'm way too lazy this morning to find a link to the article - still won't give more to charity in spite of lower taxes because that was a just a convenient excuse. But, then, I am crazy cynical and pessimistic.

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Re: Will you donate less to Charity?

Post by chw » Sun Dec 24, 2017 8:12 am

OldSport wrote:
Sun Dec 24, 2017 1:35 am
What is a DAF? When does it make sense to use one?
Acronym for Donor Advised Fund. You direct a donation to the fund (minimum is usually at least 5K), in return for a charitable donation deduction in the year of the donation. You can then donate to charities of your choice in the year of the donation or future years. Charities donated to must be a 503c3 organization.

Many DAFs are setup with taxable appreciated assets(usually equities), and donors may typically bunch several years of expected giving into one donation year (using the DAF) in order to minimize taxes in a certain year. With new standard deduction thresholds next year, many tax filers are realizing they may not get a tax benefit from charitable donations, and are using a DAF to bunch future year donations into 2017.

Vanguard, Fidelity, Schwab, offer these funds, but time is running out to open one in 2017, unless you already have a brokerage with one of these firms.

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bengal22
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Re: Will you donate less to Charity?

Post by bengal22 » Sun Dec 24, 2017 8:18 am

Tax consideration was never a factor in my level of giving. I did things to enhance my taxes(like donating this month for next year's giving) but it was never a factor in my level of giving. My level of giving will not change due to tax considerations.

docnews
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Re: Will you donate less to Charity?

Post by docnews » Sun Dec 24, 2017 8:19 am

Absolutely not.

2 points:
2/3 of our country do not itemize and they still give. 1 report said Mississippi was the most generous by percentage despite its poverty. I suspect many who itemize are quite miserly in comparison, even the one's who tithe to a religion. Ever heard of the which 10% debate with AGI vs gross? The poorer don't consider such things.

1 poster mentioned they will look more closely at their donations now. This is a good thing. Some charities are pretty self enriching and prey on those who hate our government. "Give a little to us and screw Uncle Sam!" Some foundations are pretty self serving including one's setup by BOTH recent presidential candidates.

I personally will still benefit from itemizing due to high income plus high percentage of charitable contributions but I believe they should have axed all of Schedule A. This new tax reform will make Schedule A "a tool of the top 10%" making it more of a political target in the future.

Silk McCue
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Re: Will you donate less to Charity?

Post by Silk McCue » Sun Dec 24, 2017 8:22 am

True charity comes from a generous heart not from thought of personal benefit. What a shame it would be to give less in the absence of a tax benefit. It reminds me of a line from a classic holiday song "You're a Mean One,Mr. Grinch!".

Cash
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Re: Will you donate less to Charity?

Post by Cash » Sun Dec 24, 2017 8:44 am

No, but we will continue to be strategic about the timing of the donations. We are putting 5 years of donations in our DAF this week not because we will lose the ability to itemize, but because a) our marginal tax rate will be lower going forward, so our donation is worth more now, and b) we owe a lot of taxes this year, and we would rather donate $1 to charity than pay Uncle Sam $.40.

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samsoes
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Re: Will you donate less to Charity?

Post by samsoes » Sun Dec 24, 2017 8:55 am

I remember the day, way back when I just started filing a tax return, that charitable deductions were on page 1 of the 1040A, before the final AGI determination. This incentivized charitable contributions for folks who didn't itemize.
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fred9x
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Use RMD from Traditional IRA

Post by fred9x » Sun Dec 24, 2017 9:11 am

If you are over 59 &1/2 you can have your IRA withdrawal go directly to a charity and those dollars won't be taxed. I don't have a DAF I just call Vanguard and give them the details. They send me the checks made out to the charity with my name on them.

RadAudit
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Re: Will you donate less to Charity?

Post by RadAudit » Sun Dec 24, 2017 9:25 am

Sheepdog wrote:
Sun Dec 24, 2017 1:13 am
I have never given to charity because of federal tax deductions. It was a nice benefit, but that was not the reason. I give because of needs. ... I will not give less from this point on because of the recent tax legislation. To the contrary, I will give a higher amount each year as I have in the last 10 years in retirement because the needs are so great ...
Thank you for high lighting the reason for charitable giving.
FI is the best revenge. LBYM. Invest the rest. Stay the course.

NYC_Guy
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Re: Will you donate less to Charity?

Post by NYC_Guy » Sun Dec 24, 2017 9:41 am

PhysicianOnFIRE wrote:
Sun Dec 24, 2017 12:41 am
NYC_Guy wrote:
Sat Dec 23, 2017 11:00 pm
With the repeal of the Pease limitation, my charitable donations just got more valuable. And they are more valuable to me next year. So my 2017 annual charity checks are going out in 2018 (instead of next week).
That's not how the Pease limitation works. It's a 1% to 1.2% surtax on income disguised as a limitation on itemized deductions. You may want to reconsider as you're quite possibly in a lower marginal income tax bracket next year.

I'll be giving more in future years, but via our DAF and very little directly. I've decided to take my tax deductions up front and donate slowly over many years. This month, I topped off our DAF(s) to my goal of 10% of our retirement nest egg. I may add to to our DAF accounts later on, and I would do it as a lump sum later on.

:beer
-PoF
My 2017 state/local marginal rate is nearly 13%, which effectively reduces my Federal marginal rate by about 4% due to SALT deductability (after giving effect to the Pease limit). Put another way, for every additional dollar I contribute to charity in 2017, I save about 48 cents in tax. Next year, my state and local income tax remains the same but my federal marginal rate increases from 35.6% (39.6% less the ~4% offest due to SALT deductability) to 37%. So charitable contributions will save me about 50 cents for every dollar next year. This is the math for living in NYC or California and being in the highest bracket. I understand why Kitces described the effect the Pease limit the way he did, but it really only holds true when SALT was a base deduction...if Pease had stayed in place, charitable contributions would have been hit very hard.

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