Generosity

The new tax plan keeps charitable donations as tax deductible.  As the end of the year went by many causes were asking for funds because donations are tax deductible.  As a frugal wizard, where does generosity and giving fit into your life?  You may think that there is no place for giving as that will delay your early retirement and you are on the journey for yourself.  I can understand if you don’t want to give; as for me, I see many worthy causes worth giving to.  As one who was lucky to be born in America I have had a giant leg up in the rat race and think that helping others less fortunate is something I would like to do.  Giving money will certainly delay your retirement, but life is more than just money.

Tax break

First, let me say that I hate it when people say, ‘Of course they are donating money, they get a tax write off.’  Do these people think that rich people get to donate free money or something?  So what does it mean that charitable donations are tax deductible or that they are written off?  Well, it means that if you donate $1000 you can reduce your taxable income by $1000.  Say you made $60,000, you’d be in the 25% tax bracket, so you could save $1000 * .25 = $250 on taxes right?  Well, only if you itemize deductions.  For 2017, you would only do so if your deduction were more than the standard one of $6,350.  Unless you had a lot of other deductions, you probably wouldn’t make it over this limit, so your donation wouldn’t be useful to you.  If you have a mortgage or lots of donations, then it is more likely that donations will help reduce your taxes.  For rich people this can be helpful because the poorer person may have been able to give $1000 for $750 worth of take home pay whereas the rich person get to give $1000 for $606 worth of take home pay.  However, in both cases there is no free money, they both are donating their hard earned money.

There are ways to get an even better deal by donating appreciated stock so the person would not need to pay capital gains on it.  You can also get more advanced with a donor advised fund.

Friends and family

Sometimes you have a friend or family member in need of help.  Sometimes this person may have been trying hard and other times they may blow all their money while earning a high salary.  Either way you have to determine whether you want to help and whether helping them is actually hurting them.  When you give money to someone who is addicted to gambling you probably are not helping.  No matter what, you can give or loan the money, but only do so with amounts that you are willing to lose.  However, this is not something that you will be able to deduct.

Religious causes

Religious causes run off of donations.  Unfortunately, some gurus/pastors/leaders take advantage of this to enrich themselves which is disgusting.  If you have a certain belief I would challenge you to look into where your funds are going.  I think transparency is an important factor to giving and if asking questions is met with silence then maybe the cause isn’t as honest as expected.

Charities

The same problems with religious causes can be true of other charities.  There are charities for just about anything.  Certain disabilities, races, pets, scholarships, you name it and it probably exists.  Make sure you check out where your money is going.

Conclusion

I’m happy that donations in the US keep increasing.  You are certainly under no obligation to do so, but if you do make sure to look into what your money goes toward.  I almost forgot, you can certainly donate time or in other ways as well.  As for me I have enjoyed supporting friends and a kid in Peru through Compassion.  Thank you for helping!

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