A few years back, three very different things happened and, to the best of my recollection they didn’t happen all that close together.
First, in 2012, I wrote the post How to Give Like a Billionaire. In it I described how to use Donor Advised Funds (DAF) to maximize your tax deduction for your charitable contributions. In short, the idea was that by making a large donation into your DAF and then distributing the money over the following years, more of it would be deductible.
For example, let’s say you plan to give away $10,000 a year for the next five years. Back in those days, the standard deduction was $5950 for singles and $11,900 for those married and filing jointly. While the standard deduction is a wonderful thing, this also meant a large portion, maybe almost all, of your contribution wouldn’t go to reducing your tax bill. With a DAF, on the other hand, you could contribute and deduct the full $50,000 in the first year and then distribute it in your planned $10,000 chunks over the next five years.
Second, around that time, I was also looking for a new charity to support. Specifically, I wanted one that provided services to Native Americans. I don’t recall how, but the one I found was Adopt-a-Native-Elder (ANE) run by Linda Myers out of Utah. She and her team serve Elders ranging in age from 75 to over 100, mostly on the Navajo Reservation. Native Americans in general are the single most disadvantaged group in our country and none more so than the elderly. Many live in very remote areas on the Res and often without electricity or running water.
In short, this was exactly what I was looking for. Except for one thing. They were not listed on Charity Navigator (CN), my go-to for vetting charities. Ordinarily that would have been the end of it. There are simply too many scams out there and too many fine organizations not to go with one whose integrity can be confirmed. And, in fact, I did walk away.
But I kept checking back and the more I learned, the more I liked what I saw. Finally, I convinced myself to take a chance on them figuring they were just too small to have the time and resources to go through the Charity Navigator vetting process. Still it made me nervous and every time I had the occasion to go on the CN website, I looked to see if they were listed. Then, after a year or two, there they were and with absolutely first rate scores.
Third, probably around 2015 we were spending a month or so at Shamba, my in-laws’ beach house on Lake Michigan. We had invited Carl (Mr. 1500 Days) and his family to join us for a few days. Carl, being Carl, brought along his pals Keith (The Wealthy Accountant) and Leif (Physician on FIRE). By the end of the weekend, I had two new friends and one cool new idea.
The cool idea came from Keith and it was this: If you have a business, rather than making a charitable donation and listing it on your Schedule A, buy a sponsorship with that charity and deduct it as a business expense. That way you get to deduct the full amount from dollar #1 without your standard deduction pulling away some of the tax savings.
Coincidentally, and very usefully, just this month Keith wrote a post describing this approach in detail so I don’t have to: Charitable giving for businesses
While at the time this was very interesting and I did indeed have a small business – this blog – the revenue was so low it didn’t even cover my expenses. The last thing I needed was a new, even if deductible, expense.
So this all got tucked away into my memory banks and had been rattling around there for the last few years, until a couple of months back. Then, three more things occurred to me:
- The Tax Cuts and Jobs Act (TCJA) of 2017 dramatically raised the standard deduction. It is now $12,400 for singles and $24,800 for those married and filing jointly. To be clear, this is great for us taxpayers. But it does reduce the potential tax savings of your charitable contributions, and that makes the sponsorship idea all the more attractive.
- With the growth of my blog and my efforts to monetize it, along with the royalties from The Simple Path to Wealth, my little business is now solidly profitable and in the position to help me give away even more money than before.
- My respect and enthusiasm for the work Linda and her team do at Adopt-a-Native-Elder has only grown through the years and I wanted to expand my support.
With that in mind, in April I sent Linda the following email:
The XX XXXXXXX Charitable Fund
More on Adopt-a-Native-Elder
Ordinarily, I don’t like to talk about the specifics of my charitable giving and never have before.* While the religion didn’t stick, some of the teachings from my Catholic upbringing did. Like this one:
Matthew 6:3 (King James Version): “But when thou doest alms, let not thy left hand know what thy right hand doeth.”
As phrases.org.uk explains:
That meaning alluded to the wisdom of not giving oneself credit for providing charity to others – just give and forget about it. That view was reiterated by Henry Thoreau in his Walden; or life in the woods, 1854:
“If you should ever be betrayed into any of these philanthropies, do not let your left hand know what your right hand does, for it is not worth knowing.”
While that always made sense to me, in this post I have crossed the line in the interest of explaining this sponsorship/giving/tax technique. Since I have, I may as well take it a step further.
Not only is Adopt-a-Native-Elder incredibly responsible and effective in using the money folks like us contribute, the need is great. Especially in this time of Covid-19.
In one of our conversations, Linda shared with me that the Navajo Reservation is the single most hard hit population in our country with this virus. Seems when the economy shut down, many young Navajos working off the Res were among the first to be laid off. Before the risk was fully understood, they returned to their families many of whom live in multi-generational households. The virus, of course, loved this.
Sure enough, shortly after Linda gave me an insiders look, this tragedy showed up in the news:
“TUESDAY, June 9, 2020 (HealthDay News) — The U.S. center hardest hit by COVID-19 isn’t headline-grabbing New York City; it’s the Navajo Nation in the American southwest…”
If you are looking for a new charity to support, this is a great one. Mostly they focus on delivering food, wood stoves, firewood and helping the Elders sell their hand woven blankets and other goods.
Tell Linda I sent you!
*This should in no way be taken as a criticism of those who do talk about their charitable activities. There are many benefits to sharing those, not the least of which is lighting the way for me to share this story with you.