MM: Taxes, Income Level and Charitable Giving/Retirement Savings

bmo88

Just curious if anyone else has figured this out. I am thinking we will likely need to seek out an accountant/tax specialist, but just wondering where others may have started or got information.

This year, DH and I jumped up income significantly and now fall in the 28% bracket. We are wondering what is the "sweet spot" for charitable giving and retirement contributions to maximize our tax savings. We already give with the intent of being charitable and we save 17% toward retirement, but would now like to maximize the tax benefits. 

Has anyone come across any helpful calucaltors or articles/information to figure this information out?

smerka

The best thing to do is probably just play with your tax return. You can only put $17,500 per year in a 401k plan so that's about the max you can reduce your taxable income except for adding a HSA into the mix. Assuming you already itemize your deductions (schedule A), charitable giving is just going to increase your itemize deductions. Basically reducing the income you pay tax on. But like I said, start by playing with the numbers on your tax return. And congrats on the pay raises!

jtmh2012

smerka said:

taxable income except for adding a HSA into the mix. Assuming you already itemize your deductions (schedule A), charitable giving is just going to increase your itemize deductions. Basically reducing the income you pay tax on. But like I said, start by playing with the numbers on your tax return. And congrats on the pay raises!

I'm not trying to knock charitable giving, but since you're already giving with the intent to be charitable and are now looking for tax benefits, I wanted to toss this out there.  While having more deductions will lower your tax, you could conceivably be say donating $100 to save say $25 on your taxes.  But there are situations where it makes sense.

hoffse

We're in the 28% bracket too.

Best and cheapest way to do it is to just play with some numbers.  PP is right that you might be making a $100 donation to save $28 in taxes, but if you want to donate anyway that's something that should probably be considered.

Keep in mind that if you donate more than $5K in-kind (clothes, etc.) you have to have an appraisal done.

csuave

When I do taxes for 2015 I am going to investigate every other year giving for large donations.

The concept is to double up donations every other year and in the off years take the standard deduction thus maximizing tax benefits.  I'm not sure yet if this will benefit us so I need to do the number crunching based on donations and deductions for taxes, etc.