The Sunday Best (12/17/2017)
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.
Presenting, this week’s Sunday Best:
You know what else can bust a budget? Car commuting. I prefer biking to work when the weather allows, but admittedly I drive all winter long (and to and from our second home). How much does commuting cost you? Transportation Evolved has The Real Cost of Commuting Calculator to help you answer that question.
The annual Mountain of Debt data for graduating medical students was released this fall. Anesthesiologist Dr. Charles Cochran of Life of a Med Student dissects the numbers in Medical Student Debt: The 2017 Numbers.
How could a physician possibly pay off the absurd levels of accrued debt? With a great job, of course! Radiologist Dr. Walter Nguyen, the Senior Resident has some advice for residents and others when it’s Time to Look for a Job.
Someone I know had an ER visit for a migraine that resulted in an $8,000 bill. And that’s with no imaging. Pediatric Emergency physician Rogue Dad, MD also recognizes The Financial Folly of the US Healthcare System.
- Grant Sabatier of Millennial Money is featured on CNBC in Bitcoin Millionaire: Don’t Invest in Bitcoin.
- Passive Income MD channels his inner Seinfeld in What’s the Deal with Bitcoin?
- Larry Swedroe of ETF.com shares his fears in Bitcoin & Its Risks.
- A Financially Savvy Doc asks, I’ve Made How Much from Bitcoin?
Are you ready to be inspired by some non-Bitcoin millionaires? The latest batch includes a foreign aid worker with a $69,000 a year salary and a father / son team who have similar multimillion dollar net worths. From ESI Money:
- Millionaire Interview 26
- Millionaire Interview 27
- Millionaire Interview 28
- Millionaire Interview 29
- Millionaire Interview 30
Would millionaire status make you happy? For the millionaire readers, does it? Amy @ Life Zemplified has some ideas on what it takest to be happy. How to Be Happy? Do These 3,677 Things and It’s Yours!
Never a Better Time to Open Your Donor Advised Fund
It looks increasingly likely that tax reform will be signed into law and take effect in two short weeks. Everyone will be affected differently by the changes to the tax code, but there are two provisions that make it more likely that you’ll benefit significantly less from future charitable giving compared to giving now in 2017.
First, the standard deduction will nearly double under proposed tax reform. This means many fewer Americans will benefit from itemizing deductions. If your total deductions don’t exceed the new $24,000 standard deduction, your donated dollars won’t lower taxes one bit.
Second, your marginal tax rate will most likely be lower in 2018 and beyond. A couple earning from $165,000 to $315,000 (married filing jointly) will be in the 24% federal income tax bracket. Currently, most of that income would be in the 33% federal income tax bracket.
Why start a donor advised fund now? Doing so will allow you to take a full deduction at this year’s presumably higher marginal tax rate (assuming you itemize currently). Let’s say, for example, that you plan to donate $10,000 a year over the next five years.
If you donate $10,000 to charity in each of the next five years, you would not receive any deduction unless your other itemized deductions total at least $14,000. The donation would only be fully deductible if your other itemized deductions total at least $24,000. And you will probably be receiving the deduction at a lower marginal tax rate. I expect that to be 24% for us based on my income in the coming year(s).
Conversely, you could start a donor advised fund with $50,000 in appreciated funds today. You’ll eliminate the capital gains in those funds, get a tax refund of your marginal tax rate (for me, that would be 33% of $50,000 = $16,500 plus a state tax refund). You could then give $10,000 (plus investment returns) from the DAF to your selected charities each of the next five years.
To me, it’s a no-brainer, particularly if you already have a taxable account with one of the “big three” brokerages that have low cost funds and similar charitable DAF programs. Those being Vanguard, Fidelity, and Schwab, and they make it simple to open a DAF. The latter two can be opened with as little as $5,000 and allow grants from your fund starting at $50. Vanguard’s minimums are steeper at $25,000 to open and $500 for a grant from the fund.
Finally, don’t think of tax optimization of charitable giving as getting the most back for your donated dollar. Think of it as getting the most money to charity for each dollar you actually part with. You could hand the food shelf a $100 bill or you could give $180 in a tax-deductible manner and it would cost you $100. Which do you think the charity prefers?
For more information, please see the following posts of mine on the subject:
The 12 FI Days of Christmas
The moment I’ve been waiting for since I first conjured up the idea of this blog has arrived. It’s the surest sign that a blog has “made it.” Some bloggers want to be featured on Forbes or CNBC. Some hope for a post to go viral on Facebook. Others measure success by money, looking to earn six figures per year or even per month with their blog.
But every blogger aspires to this. It’s clearly the pinnacle of the blogging world. Nothing could possibly be better than:
To be featured as a LEGO character in a Christmas music video.
Without further ado, grab some popcorn and check out what our friends at I Dream of FIRE, My Sons Father, and Budget Epicurean have put together featuring Dave Ramsey, Mad Fientist, Physician on FIRE, Mr. Money Mustache, Brad from Choose FI, Root of Good, Broke Millennial, J.L. Collins, Dividend Diplomats, Afford Anything, Fiery Millennials, Budgets are Sexy, Retirement Manifesto and 1500 Days.
Be sure to stick around to see what my character does to LEGO Dave Ramsey. It’s explosive!
To learn more about how this video came together, visit I Dream of FIRE’s post.
To help support this site and its charitable mission, consider finishing your Christmas shopping list with the Amazon links below. Thank you for your support!
Have a cheerful week!
-Physician on FIRE