One consideration I’d add that I don’t yet see reflected in your post or in the comments is that it could very well be that there will still be some sort of tax relief when you give later (and that it could even be larger at that point!), so tax relief may inform the giving now vs giving later question less than it may seem at first sight.
It’s possible there is reasonable case to be made that tax relief on money donated later is going to be (much) lower in expectation than on money donated now (e.g. perhaps the current system priviliges small yearly donations over large single ones, or perhaps there are longer-term downward trends in policy around tax relief), but that case needs to be made in order to make the claim that current tax relief systems push (strongly) in the direction of giving now.
(I don’t know much about this at all, but FWIW my best guess would be tax relief for an individual giving later will be slightly lower in expectation than for an individual giving now, which would push slightly—but only slightly! - in the direction of giving now)
Thanks very much for answering Sjir. I’m not sure why having tax relief on future income would change the answer to what to do with this year’s income a lot, unless one were not going to donate future years’ income—else, the tax relief on future income is used up by donating that income. Of course, it may be possible to use relief on future income that would not counterfactually get donated (that needed for living expenses, saving etc.), so in that case you’re right that the return from tax relief for donating now vs later is less than I said for that portion (e.g. 1.67/1.25-1=34% for donating at higher rate now rather than basic rate later). Indeed, this may reduce the average return from donating from income in the 25% tax bracket to close to zero in many cases.
Re “perhaps there are longer-term downward trends in policy around tax relief”—again, it doesn’t seem to me that this would likely strongly affect what it’s best to do with this year’s income, along the lines of the above. In the UK a previous finance minister did try a few years ago to restrict tax relief at the higher rates, but couldn’t get it through, so it seems unlikely to me that it would happen in the next few years, but could happen in the longer term.
Sorry if I didn’t understand your point 100% correctly.
I think you got it quite well :). Depending on the system and your particular situation, you could indeed use tax relief on future income/capital gains for donations you would make “from income in earlier years” (as money is fungible), and this could account for a large proportion of the relief you would get on it now.
Thanks for raising this question!
One consideration I’d add that I don’t yet see reflected in your post or in the comments is that it could very well be that there will still be some sort of tax relief when you give later (and that it could even be larger at that point!), so tax relief may inform the giving now vs giving later question less than it may seem at first sight.
It’s possible there is reasonable case to be made that tax relief on money donated later is going to be (much) lower in expectation than on money donated now (e.g. perhaps the current system priviliges small yearly donations over large single ones, or perhaps there are longer-term downward trends in policy around tax relief), but that case needs to be made in order to make the claim that current tax relief systems push (strongly) in the direction of giving now.
(I don’t know much about this at all, but FWIW my best guess would be tax relief for an individual giving later will be slightly lower in expectation than for an individual giving now, which would push slightly—but only slightly! - in the direction of giving now)
Thanks very much for answering Sjir. I’m not sure why having tax relief on future income would change the answer to what to do with this year’s income a lot, unless one were not going to donate future years’ income—else, the tax relief on future income is used up by donating that income. Of course, it may be possible to use relief on future income that would not counterfactually get donated (that needed for living expenses, saving etc.), so in that case you’re right that the return from tax relief for donating now vs later is less than I said for that portion (e.g. 1.67/1.25-1=34% for donating at higher rate now rather than basic rate later). Indeed, this may reduce the average return from donating from income in the 25% tax bracket to close to zero in many cases.
Re “perhaps there are longer-term downward trends in policy around tax relief”—again, it doesn’t seem to me that this would likely strongly affect what it’s best to do with this year’s income, along the lines of the above. In the UK a previous finance minister did try a few years ago to restrict tax relief at the higher rates, but couldn’t get it through, so it seems unlikely to me that it would happen in the next few years, but could happen in the longer term.
Sorry if I didn’t understand your point 100% correctly.
I think you got it quite well :). Depending on the system and your particular situation, you could indeed use tax relief on future income/capital gains for donations you would make “from income in earlier years” (as money is fungible), and this could account for a large proportion of the relief you would get on it now.