Charitable Giving Strategy

[davy88]

I'm looking for input on which charitable giving strategy makes more sense. We are American expats living abroad with more or less all of our expenses paid for by our expat contract, trying to donate about $100k per year while we're here.

Option #1
Purchase total market index funds in our taxable account, tax loss harvesting if they drop in price. Hold long-term and donate any appreciated stock after one year. We have plenty of cash flow so there would be no immediate need to donate exactly when the stock hit one year, or no heartbreak if we had to TLH and not donate from the stock. What would be stuff to look out for in this? I have VTI in my retirement accounts so presumably I'd want to invest in something different to avoid any chance of wash sales. Would the best alternative be VOO? Best case would be something without a lot of dividends.

Option #2
Open donor advised fund, contributing cash. Not sure what the threshold would be for how much money should be involved to make it worth it? We do take advantage of $30k of company match (100% on contributions to certain charities we support), so that money I believe would need to come out of our personal account, not a DAF.

Option #3
Other suggestions other than continuing with the status quo, which is basically just donating via credit cards or bank withdrawals, occasionally using it for a new credit card bonus?

[Jimbo Moneybags]

Have you considered using a DAF and funding it with highly appreciated shares rather than cash?

[jebmke]

What will your AGI be. Normally, LTCG stock stock maximum donation is 30%. Cash is 60%

[davy88]

It's a bit tricky because we're tax equalized, so our W-2s may be around $500-700k while our actual combined wages are closer to $350k. It gets highly inflated for our COLA, company provided rent, kids schooling, etc. We then are squared up by the company with an actual tax return and a hypothetical one, which is calculated as if we're not abroad.

I just donated the remainder of our stock in taxable, so there aren't any highly appreciated stock anymore. We have about $50k outside of our emergency funds and such that is sitting in VUSXX waiting for me to figure out what's next.

[jebmke]

It's a bit tricky because we're tax equalized, so our W-2s may be around $500-700k while our actual combined wages are closer to $350k. It gets highly inflated for our COLA, company provided rent, kids schooling, etc. We then are squared up by the company with an actual tax return and a hypothetical one, which is calculated as if we're not abroad.

I know the feeling. I was in Brussels for 4+ years with a similar plan. With various foreign tax payments and allowances the numbers get enormous.

Different arrangements might treat the deductions differently. You will want to make sure that you get the value of the deduction and it doesn't get "equalized away." If that is a risk, I'd defer doing any of this until you repatriate and you are off the equalization.

Presumably a firm is doing all the tax calcs and equalization schedules for you. They should be able to walk you through it -- it can rapidly get very confusing (and I say this as a finance person with tax experience -- it gets quite messy).

[toddthebod]

Unless you have a specific charity in mind, I would go the DAF route. You can control the timing of the tax benefits, and you aren't forced to figure out who to give your money to right away. Last year we took out a new mortgage that pushed us into itemized deduction territory, so I donated a bunch to my DAF in order to maximize the tax benefits. I don't know yet who is going to get all that money, but I don't have to decide any time soon.

[orthros]

I'm giving significantly through a DAF using appreciated taxable ETFs. Buying either index ETFs or individual stocks (if you're open to direct indexing to maximize both donation value and tax loss harvesting) works well to maximize your charitable impact for a fixed amount of money.