“But that does not make sense.” Ed leaned forward in his chair, staring at Dave, his accountant. “I made a total of $20,000 in charitable gifts over the last year, and yet you say I can’t take a deduction?”
“I didn’t say that.” Dave raked his fingers through his short beard, then reached for the cup of coffee beside the neat stack of papers on his desk. “I just said that your charitable gifts won’t make any difference on your taxes.”
“You see,” he continued, “you have two options. You can itemize your deductions, which includes charitable gifts, medical expenses, etc. Or you can take the standard deduction, which is at $30,000[1] for a married couple. Because your charitable contribution and medical expenses are only at $23,000, you are better off to take the standard deduction.”
Ed glanced at the rain driving against the window behind Dave’s desk as he rose to leave. His eyebrows furrowed. “It still doesn’t make much sense, but you know more about this tax business than I do.”
Why do they have to make taxes so difficult to understand? Ed let himself out through the brown-stained oak door into the driving rain and made a dash for the vehicle.
***
“It’s good to see the sun shining again after all the rain we had last week. My mood was beginning to match the weather,” Ed remarked as he reached for another piece of homemade wheat bread and began slathering on a generous amount of peanut butter. He topped it with a thick chunk of cheese and a slice of ham. He took a big bite, savoring the blast of flavor, then resumed.
“Dealing with taxes last week didn’t help my mood any. I still don’t understand the difference between the standard and itemized deductions. Why do they have to make something so unpleasant, so difficult to understand?”
Ed’s church had gathered the evening before for the annual camping trip. Now the children had all eaten their lunch and the men were cleaning up the leftover morsels of dessert. Three of Ed’s trusted friends were sitting around the table in the corner of the pavilion.
Harvey, an older man, paused with his fork halfway to his mouth, the portion of pie teetering precariously. “Why do you need to understand the difference between the two types of deductions?” he questioned, his eyes twinkling as he noticed the younger man’s frustration.
“My accountant says because the gifts I made to charity are less than the standard deduction, I can’t deduct my charitable gifts. It doesn’t make sense.” Ed’s face showed the frustration he felt. “If that is the case, what is the purpose of tracking my giving if I can’t deduct it, anyway?”
Harvey became serious. “I like to hear that you are trying to be a good steward of what God has entrusted to your care. It’s good to hear our young people are being generous givers while attempting to maximize their tax savings. The more we save on taxes, the more we have to channel to God’s work.”
Harvey paused, glancing around the circle of listening men. “I can explain the difference in the deductions and maybe give you an extra tool in the process,” he offered. “But first, would you care to share your financial situation and how it affects your taxes?”
“Sure,” Ed said, after glancing at the group of men. “I don’t normally share like this, but you are my friends. I can trust you with my personal information.” Taking a sip of coffee, he began, “I had $120,000 of taxable income before any deductions were taken. Since I have one child, I know I get a $2,000 reduction on my tax bill. My accountant said the taxes I was due were a little over $8,000[2] after taking the standard deduction, but what I still don’t understand is why I can’t also deduct the $20,000 of charitable contributions I made?”
“I will explain the deductions first.” Harvey leaned back in his chair and patted his stomach with a contented smile. “Every taxpayer is allowed to take the standard deduction. Even if you make no gifts to charity, you are still able to deduct $30,000 from your income.”
He paused as he eyed the partially eaten cherry pie. Winning against the urge to take another piece, he continued. “If your medical expenses and charitable gifts exceed $30,000, then you will want to choose the itemized deduction. Otherwise, you would lose any amounts over $30,000. Does that make sense?”
“Yes, that does make sense. So, my accountant was basically saying that until my charitable giving exceeds the standard deduction, my giving won’t lower my taxable income?”
“Exactly. But this is where I want to share a tool to show how you could reduce your taxes even more.” Harvey steepled his hands as he pondered his next words. “There is so much more to stewardship than just diligently tithing 10 percent and going on your way. While we are required to pay our taxes, there are many ways to reduce your taxable income and channel more funds to a better cause.”
“But isn’t it illegal to avoid taxes?” questioned Ben from farther down the table.
“Not at all. It is only illegal to evade taxes, and there is a difference. The IRS has built in many ways to lower taxes through charitable giving because they know it benefits society if people help in charitable causes. While I don’t agree with everything they consider a charity, it does allow us to use those same tools to fund our churches, schools, medical needs, and other charities that we trust to use the money wisely.”
“What is the tool you are speaking of?” asked Ed. He was eyeing the plate of cookies, wondering if another one would fit in.
“As you all know, I have a small food business where we supply some of the local stores and restaurants with meats, cheese, baked goods, and in season produce. We also sell some excess produce at the local auction. I have been gifting some of these foods to a Foundation, and the proceeds go into my Donor Advised Fund. I then do all my charitable giving from the fund.”
“That sounds complicated,” said Ed.
“Actually, it is quite simple,” said Harvey. “Let’s say I have a bin of pumpkins or a pallet of peppers ready to go to the auction. I fill out a form I have on hand which states that I am gifting the pumpkins and peppers to the Foundation, then throw it into the mail. I then take the produce to the auction and tell them it belongs to the Foundation. The Foundation has an account at the auction and the check is sent directly to them.”
Succumbing to the temptation, Harvey lifted a small cookie from the plate, dipped it into his coffee and popped the whole thing into his mouth, before continuing.
“Sometimes I have a large order going to one of my bigger customers. After taking the order, I fill out the form, listing the items on the order and send it to the Foundation. The Foundation then invoices the customer, and they pay directly to the Foundation.”
“But how does that save on taxes?” one of the men asked.
“That is where the standard deduction comes in. I usually have around $250,000 of taxable income. Because I don’t need that much income, I usually give about $60,000 to charity. If I sold the food and gifted cash, I would itemize my deduction and have $190,000 of taxable income. But since I gave the product away, I don’t report that $60,000 of income, which puts me in the exact same place, $190,000. Because I haven’t taken a deduction yet, I can still take the standard deduction, which will reduce my taxable income to $160,000. That additional $30,000 saves me $6,600.[3]
“That isn’t a huge saving, but it is still significant when you consider how much $6,600 can do towards a medical bill in our church or some needy widow or child in another country. Or consider how many Bibles that would place in the hands of people in countries with limited access to Bibles.”
“So, I could gift hay and lambs from my farm?” Ed asked.
Harvey nodded. “Yes, you can gift anything that has value and is saleable.”
“I am not sure I understand it fully.” Ed said. “Those are a lot of numbers to digest.”
Harvey reached for the two pie pans in the center of the table. The cherry pie had three pieces left. The full pecan pie he cut into six pieces. “Each piece represents $10,000. The one with three pieces represents the standard deduction. The one with six represents the $60,000 worth of product I gifted and the itemized deduction I would have taken if I had gifted cash. Which of these deductions would you rather take?” he asked Ed.
“The itemized deduction, of course,” Ed exclaimed.
Harvey asked for the chocolate pie from farther down the table. It had two pieces remaining. “Assuming you gave $20,000 last year, which pie would you want to take now?” he asked, indicating the pie with only two pieces.
Pointing at the pie with three pieces, Ed said, “the standard deduction.”
“Exactly,” said Harvey. “But what if you could have both pies?” Taking the chocolate pie with two pieces left, he slid them onto the pan with the three pieces of cherry pie representing the standard deduction. “If you had given hay and lambs worth $20,000, you would have been able to reduce your taxable income by $50,000 instead of $30,000.”
Ed’s face lit up. “Hey, that makes sense. I never heard of this before.”
Thomas, who had been listening silently, spoke up now. “How can you use the money in your fund?”
“It is as simple as making a call. Or you can send an email with your request. I frequently request distributions to my church for specific needs. I also have them send funds to other charities I care about. And it can be completely anonymous. Our deacon receives a check from the Foundation, and he has no idea that I am the donor.”
Harvey glanced at his watch. “I have to go because I have a few things to take care of yet this afternoon. But I have one more advantage to share with the way I do my gifting. Toward the end of each year, I calculate my income and what I have given so far and then I give what I need to, to bring it up to the total I want to give. My Donor Advised Fund gives me the flexibility to give before I know where the needs are. Then I can make distributions over time.”
Pushing back his chair and rising to his feet, Harvey glanced around the circle of intent listeners.
“Remember, stewardship is more than faithfully giving a portion of our income. Stewardship is maximizing everything God places into our care for His benefit. We take only a portion for our own sustenance. Many people want to save taxes, but that should not be our only motivation. If we are only saving taxes so we can buy that new boat or gun, we may be better off just paying the tax. Use your tax savings to bless God, who is the owner of it, anyway.”
Moreover, it is required in stewards, that a man be found faithful. 1 Corinthians 4:2
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Levi Miller lives in the hills of Coshocton, Ohio, with his wife and seven children. He enjoys studying history, especially Early Christian and Anabaptist history. He works at Christian Aid Ministries Foundation. You can reach him at bss@camoh.org, or by phone at 330-893-4915.
[1] Based on 2025 amounts.
[2] Amounts reflect only Federal taxes and not state taxes.
[3] Based on a 22% Federal tax rate. State taxes are not included.
