Tax- Standard Deduction vs Itemized Deduction

[StevieISU23]

Standard Deduction for a Couple Filing Jointly is $12,600.
Lets say Our Itemized Deduction is $10,000. (not including donations)

My wife and I enjoy Donating to good causes, Church, etc
But, the first $2,600 we donate, each year, would have No financial benefit in terms of taxes.
For discussion, lets say we normally donate $3K each year-

The financial side of me says, lets not donate in year 1&2 and just take the Standard Deduction.
Then in year 3, we triple up our donations ($9K). (In year 3 we see no effect on the 1st $2600, but the rest of the donations (6400) we see a tax benefit to us.........an hypothetically we could pass that additional tax benefit as a larger donation?.......follow me?

**My Wife and some others, have said that we should still donate each year.
She doesn't want to turn down the church, or other causes, or benefits.
I know that Donations are for the good of the cause, and not specifically for tax deductions.

But, I am trying to think financially, and not put your heart into it.


I see it as in the end, we would end up donating more, by financially managing my taxes.


My wife and I seem at odds on this.....
Anyones thoughts or opinions on this?





Example added:
I guess I look at it this way-
Lets make up a tax bracket of 20%

A. Church/Charity get-
Year 1: $3000
Year 2: $3000
Year 3: $3000


B.Church/Charity get-
Year 1: $0.00
Year 2: $0.00
Year 3: $10,280 (assuming $6400 tax break at 20%= $1,280.00).
ie: church/Charities get more money?


Logical?

 

[isufbcurt]

Standard Deduction for a Couple Filing Jointly is $12,600.
Lets say Our Itemized Deduction is $10,000. (not including donations)

My wife and I enjoy Donating to good causes, Church, etc
But, the first $2,600 we donate, each year, would have No financial benefit in terms of taxes.
For discussion, lets say we normally donate $3K each year-

The financial side of me says, lets not donate in year 1&2 and just take the Standard Deduction.
Then in year 3, we triple up our donations ($9K). (In year 3 we see no effect on the 1st $2600, but the rest of the donations (6400) we see a tax benefit to us.........an hypothetically we could pass that additional tax benefit as a larger donation?.......follow me?

**My Wife and some others, have said that we should still donate each year.
She doesn't want to turn down the church, or other causes, or benefits.
I know that Donations are for the good of the cause, and not specifically for tax deductions.

But, I am trying to think financially, and not put your heart into it.


I see it as in the end, we would end up donating more, by financially managing my taxes.


My wife and I seem at odds on this.....
Anyones thoughts or opinions on this?

Strictly financially yes your opinion makes sense.

Strictly charitable, your a heartless bastard. joking

 

[diaclone]

Tough choice.....WWJD???

Does "sacrifice" trump money? Do your intended charities struggle to operate? Do the choices damage your family either way? Are there any lessons here that you want to teach your kids?

Just questions that I would ask myself, but everyone's situation is completely different. Best of luck.

 

[capitalcityguy]

Only because you mention “church”, I’d point you to look at what your theology (or the Bible) tells you about giving and being charitable to make that decision.

 

[1100011CS]

The answer is pretty simple: donate $20K to the Cyclone Club

 

[ArgentCy]

Simple math problem. You keep more money by doing which ever method saves you money on taxes. Most computer programs calculate it both ways and just choose the lesser. How much you choose to give to charity is another decision. You might be able to give a little more if you know you are close to being able to itemize and would save a little that way.

 

[BoxsterCy]

I don't think about tax deductions regarding donations that much. I mean I take the deduction because I itemize but I am more into looking at donations as a personal reasonable percentage of what I make and what I can give back to charity. Just my own comfort zone, big enough so I am not embarrassed as a cheap ass but not big enough to be any big time donor dude. W or W/O I would still be itemizing since property taxes alone are more then the single filer standard deduction.

So, I am of no help to you at all but I am bored this afternoon so posted anyway!

 

[IcSyU]

Strictly financially yes your opinion makes sense.

Strictly charitable, your a heartless bastard. joking

This is correct but a small caveat I would add is this is only true if the tax law is the same every year and income/deductions are the same in every year.

 

[isufbcurt]

This is correct but a small caveat I would add is this is only true if the tax law is the same every year.

True, but it isn't going to change dramatically in regards to this topic.

 

[IcSyU]

True, but it isn't going to change dramatically in regards to this topic.

Edited my original post. Assumption also would have to be that taxable income is the same for all 3 years. You'd rather itemize the year of highest income.

 

[boone7247]

Why not come up with a way to split the difference. In many donation situations you are talking about making a donation either earlier or later by a month or two that makes the difference.

Church donations, are a little different as they typically happen throughout the year. So in even years make donation in January and December, and in odd years only make your donations that you make consistently month to month. Then the charity isn't getting hurt by missing out on your donation, and you are helping yourself out by increasing your donations in certain years, while not being hurt in other years. You could couple this with paying your RE taxes early, in those years to up your payments. And if you have to pay estimated taxes be sure to pay your state taxes in the same fashion.

 

[StevieISU23]

I guess I look at it this way-
Lets make up a tax bracket of 20%

A. Church/Charity get-
Year 1: $3000
Year 2: $3000
Year 3: $3000


B.Church/Charity get-
Year 1: $0.00
Year 2: $0.00
Year 3: $10,280 (assuming $6400 tax break at 20%= $1,280.00).
ie: church/Charities get more money?


Logical?

 

[Doc]

I guess I look at it this way-
Lets make up a tax bracket of 20%

A. Church/Charity get-
Year 1: $3000
Year 2: $3000
Year 3: $3000


B.Church/Charity get-
Year 1: $0.00
Year 2: $0.00
Year 3: $10,280 (assuming $6400 tax break at 20%= $1,280.00).
ie: church/Charities get more money?


Logical?

Yeah, but churches and charities may value a steady cash flow more than best value. They are non-profit after all.

I'd just do what the wife says, so she doesn't feel like God is gonna smack her down in the next 2 years.

 

[stateofmind]

Since you are asking, my guess is that you will not want to write that large check in year 3. We have written the large check to the church at the end of one year, and it is hard to do for me. We do the auto-debit each pay period and I don't notice. Luckily our itemization are well over the minimum or I'd probably look at it like you do.

 

[GoCubsGo]

Since you are asking, my guess is that you will not want to write that large check in year 3. We have written the large check to the church at the end of one year, and it is hard to do for me. We do the auto-debit each pay period and I don't notice. Luckily our itemization are well over the minimum or I'd probably look at it like you do.

Agree with this. I think psychologically it would be hard to write a check that large, which would cause some people - but maybe not you - to not donate at all in the end.

 

[ArgentCy]

Plus what happens the next two years after giving a large gift and then not giving them anything... Ignore the tax implications, which are pretty minimal, and don't overthink it.

 

[Trice]

Standard Deduction for a Couple Filing Jointly is $12,600.
Lets say Our Itemized Deduction is $10,000. (not including donations)

My wife and I enjoy Donating to good causes, Church, etc
But, the first $2,600 we donate, each year, would have No financial benefit in terms of taxes.
For discussion, lets say we normally donate $3K each year-

The financial side of me says, lets not donate in year 1&2 and just take the Standard Deduction.
Then in year 3, we triple up our donations ($9K). (In year 3 we see no effect on the 1st $2600, but the rest of the donations (6400) we see a tax benefit to us.........an hypothetically we could pass that additional tax benefit as a larger donation?.......follow me?

**My Wife and some others, have said that we should still donate each year.
She doesn't want to turn down the church, or other causes, or benefits.
I know that Donations are for the good of the cause, and not specifically for tax deductions.

But, I am trying to think financially, and not put your heart into it.


I see it as in the end, we would end up donating more, by financially managing my taxes.


My wife and I seem at odds on this.....
Anyones thoughts or opinions on this?

Interesting discussion. Without disclosing more than you're comfortable with, I would ask how close you are to topping that standard deduction. Do you expect your combined salaries to go up a few thousand in the next couple of years? Did your home assessment just go up quite a bit, as many peoples' have? Will you be moving to a more expensive home or taking a home equity loan/line for improvements to your current home? Any of those could put you over the top to where you're itemizing your deductions even before you account for charitable giving.

Maybe none of that will happen this year but if you think it will within a couple years, then that will settle the question for you once and for all. Pause your giving for a year or two to realize the tax efficiency you're talking about, then once your salary or other deductions have gone up, settle into a routine of giving what/when/to whom you want, getting the full deductible value for it.

 

[BoxsterCy]

Simple math problem. You keep more money by doing which ever method saves you money on taxes. Most computer programs calculate it both ways and just choose the lesser. How much you choose to give to charity is another decision. You might be able to give a little more if you know you are close to being able to itemize and would save a little that way.

This is SO wrong. Do I have to again point out that we have firmly established by rule on CF that MATH IS HARD!

 

[mdk2isu]

This is SO wrong. Do I have to again point out that we have firmly established by rule on CF that MATH IS HARD!

 

[Incyte]

Option 3 - donate stock to avoid paying capital gains on its increase in value. I take the X amount I would give to church and instead donate stock worth the same amount (I pick the shares with the largest increase in value). I then take the cash and buy the stock at the market rate. In essence I'm changing the basis on the stock to the market rate. I also get to deduct the stock value as an itemized deduction.