I’ve sent the first royalty check of “The Military Guide” ($1136.15!) to our Fidelity charitable gift fund. From there I used their website to split it into two grants for the Wounded Warrior Project & Fisher House. The Fidelity CGF makes it easy to supply the book’s contact info to the charities without getting my personal name & snail-mail address in their databases. Fidelity’s designation letter includes my custom text: “In honor of the contributors to the book ‘The Military Guide to Financial Independence and Retirement’. Please use this contribution where it’s needed most” along with my e-mail address and the blog’s URL. This lets the charity use the money however they feel is best (even a new computer for the admin assistant or more toilet paper for the staff bathrooms) while saving them the time & expense of sending unsolicited snail-mail to my address.
I started writing the book in 2005. When you’re slogging through the details of Chapter 2 (or later sending your seventh query letter) it’s a bit difficult to envision the royalties. While I was expecting that a royalty check would eventually arrive, frankly I was surprised by its size. (Thanks for buying!) The royalties have convinced me that it’s time to generate revenue from this blog. I understand the theory of doing that, although I have no experience yet. (For those of you who’ve offered to help, I’ll be contacting you with a list of questions!) I’ve had some help with that convincing, too– I’ve been getting offers from many fine businesses who want to supply their products & services to you readers. WordPress.com won’t let me run my own ads, but they actually offer great support for going to a different website host with WordPress.ORG. I’ve built a short list of plugins that I’m ready to try with AdSense and widgets and other affiliates.
The real blogger challenge, of course, is making sure that the ads reflect our values and still support the troops. I don’t want to be picking the pockets of servicemembers just to forward their money to military charities. The advertising has to offer value to the customers as well as to the beneficiaries.
But first I could use your help tackling a tough question: what’s the tax-efficient way to donate blog revenue to charity?
Let’s back up a step: Why keep giving book royalties & blog revenue to charity at all? You contributors contributed. We wrote a book. I sold it and we donated royalties to charity. You guys can pat yourselves on your backs for an average charity donation of at least $20. How much longer do we keep this up?
Well, in the first place: I don’t need the money. I’m financially independent. I’m already buying a second longboard rack, and I’m out of storage space. I already have 50 t-shirts and two pairs of cool surf shorts. My military pension covers our beach-bum lifestyle. My spouse has her own military pension barreling down the pipeline in another decade. Our daughter has displayed considerable talents for earning & saving, and she won’t need our inheritance. (Sorry, honey. You go, girl!) Even if we were planning to give it to grandchildren (or a hospital wing), our longevity planning puts that at least 50 years away.
Why not declare a “dividend” and distribute the profits to you contributors? Well, sure, we could do that. It’d upgrade your lifestyles by roughly one Starbucks trip per month (if you’re frugal). The blog revenue might boost that hedonism to two or even three times a month. But, hey, you guys are supposed to be financially independent too– or at least striving for that distinction. Readers want to know that your stories and your advice actually work on their own and aren’t just intended to generate the revenue to make it work. If we’re so smart we still may not be rich, but we’d better be financially independent.
Donating royalties to charity also ensures that we have the right author and contributors. If I’m trying to inflate my bank account with royalties then I might make editorial & marketing decisions that aren’t necessarily in a reader’s best interests. Paying contributors might attract the wrong sort of contributors, and their stories & advice might not be so much “pay it forward” as they’d be “pay it to me!” When we donate the royalties to charity, we preserve our credibility along with our integrity. We want people who are happy to share their wealth of experience, not just grab a share of the wealth.
Which gets to the final point: if we’re donating the royalties to charity, then readers feel good about buying the book. Military support organizations can also feel good about buying it in bulk, and corporations can feel good about donating a few pallets to their own customers. (If you’re a corporation looking for a few pallets, please contact me about bulk discounts.) Everyone feels that they’re getting objective advice and practical tools while donating their money to a good cause.
So we’re gonna keep donating. All of it.
Until we’re done.
That’s a simplistic answer, but it’s also the beginning of an exit strategy. I think we have more to say, and I’d like to put out another edition of the book. (Some Impact Publications authors are on their 13th edition!) I think we can tie future editions more tightly into website tools and maybe even mobile apps. I’d like to consider tackling a different e-book format (sorry, Amazon) or even self-publishing. (Don’t worry, Impact, at least not for the 2nd edition.) I like the writing, and I think I can get better at the rest of the process.
The book may turn out to be evergreen, but in another 10 years a binding of dead trees may be considered an archaic novelty. If When that happens, the book may be absorbed into the website (or whatever we’ll be calling it) and everything may be done online… or downloaded to your smart headset in your personal flying car.
I may write the third edition, or I may move on to something else. Frankly I don’t have a clue. However I think a big, robust, revenue-earning website would be the proper incentive to attract my relief author. They could keep donating the earnings to charity or take a chance with earning their own income. One of you may even someday want to be that relief, or maybe it’ll be someone who’s still wondering about joining the military. But when I exit this gig, I want to leave a smooth-running machine ready to roll out with the new driver.
Book royalties are easy: they go on Schedule C of a tax return as self-employment income. There are all sorts of deductions to offset royalty income, and the net result is taxed as regular income. One minor annoyance with that approach is paying nearly 15% of that royalty check as self-employment income tax.
I could have just signed the royalties over to (one) charity when Impact Publications offered me the contract. That’s still an option, but it also means that we lose some flexibility. We’d have to choose one charity and we wouldn’t easily be able to switch things around. New contributors wouldn’t be able to add their votes to choosing more charities.
I’d love to just sign the royalties over to our Fidelity CGF and have them totally bypass me. Unfortunately the last time I checked, CGFs are restricted on the types of assets they can accept as charitable donations– and they’re not allowed to accept book royalty payments. If you’re a tax expert who knows a way around this restriction, I’d love to hear it.
Blogging income is also Schedule C self-employment income. That means I’d pay the self-employment tax and then donate the leftovers to charity. While I’m happy to help rescue Social Security for the rest of America, I think we’d prefer to have the blog income go directly to a charity instead of to “me”. However we’d also want to retain the flexibility to change up charities once in a while. WWP and Fisher House do a great job, but you contributors might have other places you’d like to send the money.
Another way to donate blog revenue would be to create a “Military Guide” charitable foundation– and have all the royalties & blog revenue go to that foundation. I’d have to set up the foundation so that the revenue could be booked as donations, not unrelated business income. I know how to do that. It’s a cumbersome IRS paper shuffle. I’d file IRS Form 990 tax returns every year. But then the foundation could dispense the income to any charity it wanted to. Unfortunately (for me), the advertising and book sales might be raising funds in all 50 states. That could mean the foundation would also need to be registered in all 50 states. I’m watching my spouse do this now at a non-profit, and it’s a full-time job for two people for several months. As much as I love writing, I’m not going to file 50 registrations– and the expenses of doing so might be far higher than paying self-employment tax. Again, if you’re an expert who knows whether I’d have to register in 50 states, I’d love to know how to figure out the rules.
A third way would be to have advertisers donate their payments directly to the charity. I’d think that an advertiser would rather donate directly instead of buying an ad, although I don’t know. Call me cynical, but I suspect that the revenue would be a lot lower– less than just paying the self-employment tax, anyway. Google AdSense also has an issue with bloggers announcing that ad revenue goes to charity. I suspect that I’d be able to convince them (with my tax returns?) but Google is too big to care and might not pay any attention to me.
A fourth option would be to sell out. No, not that way: I mean sell out to a blogger company that would… put me on royalties or salary. Which I’d donate to charity. However the blog would have to at least triple its current hits to attract corporate attention, and again I think we’d be spending more money than we’d be saving on avoiding self-employment taxes.
Has anyone else dealt with this “problem”? Any other ideas?
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I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers and veterans.