|
Do you want to shave your tax bill, while also benefiting your favorite charity? I know I get excited anytime I can knock out two or more items with a single punch (i.e. the old kill two birds with one stone analogy). I am sure many of you are like me. In fact, this weekend is a great example as we celebrated Father’s Day for my father-in-law and combined that with my daughter’s 22nd birthday. How much more bang for the buck can you get unless maybe you were also celebrating everyone in the family’s birthdays the same weekend! I am sure my wife will not let me get away with that one! Today, I am going to give you three strategies that can help you kill two birds with one stone. They are two-fers (i.e. two for one ideas)!  Donate Appreciated Stock Let’s face facts, after a ten-year economic cycle, we all should have some stocks, mutual funds or ETFs that now have low cost basis. This is the perfect time to give these appreciated marketable securities to charity instead of your hard-earned cash in the form of after-tax dollars. It seems so simple, but very few people consider it. As an example, we run a strategy called IA Equity Value whereby we buy and hold the ten highest dividend paying stocks in the Dow Jones Industrial Average, plus three additional positions that are either long or short at any point in time. (You can reach out to me if you want additional information on this strategy). The ten highest yielding stocks in the Dow Jones Industrial Average are rebalanced annually and do not change much from year-to-year. They tend to have some pretty large built-in gains when they do change. The strategy then is to donate that stock or stocks that will change in the annual rebalance, and then use the cash you would have used for charitable donations to buy the replacement stock positions. The result is a full charitable deduction for the donations (subject to certain limitations), the removal of a possible source of future capital gains from portfolio and the ability to rebalance without tax consequences. Pretty neat huh? Most charities will accept donations of marketable securities or you can use a donor advised fund to transfer the stock and then make your donations at a later time. Either way it works well. Qualified Charitable Distributions  This second idea is only available to those taxpayers over age 70 and with large Individual Retirement Account (IRA) holdings. Although, I don’t know why Congress does not lower the age limit on this idea?
A Qualified Charitable Distribution is the ability of a taxpayer to give to charity directly from their IRA up to $100,000 per annum. This gift allows the taxpayer to avoid the ordinary income tax on the distribution and still support their favorite charity. The taxpayer does not receive a charitable deduction, but with the new higher standard deductions under the Tax Cuts and Jobs Act of 2017, this may not be a big deal. For more on this strategy see our past post entitled “Help Your Favorite Charity And Save Tax Dollars.” Gift Sequencing Our final two-fer is gift sequencing. What is gift sequencing? It is timing charitable gifts as to most benefit you and your income tax situation. Here is a simple example, let suppose you have been giving $10,000 annually to your favorite church, synagogue or temple. Unfortunately, these charitable expenses, your mortgage interest and property taxes add up to just $23,999, when the new standard deduction of $24,000 for married filing joint clients. This essentially gives you no incremental tax benefit for these cash outlays since you are $1 shy of the standard deduction amount. In our example, let suppose it is also nearing year-end and you closed on the sale of a property or received a large bonus. Lucky you! The solution is gift sequencing. In this example, why not make next year’s $10,000 charitable gift in the current year to essentially double up your charitable deductions in the current year. In most cases, you will not make a charitable contribution next year and will double up again the year after. This does two things, it puts you over the standard deduction and allows you to deduct $9,999 of charitable contributions that would likely not be deductible next year given similar inputs. It puts real money back in your pocket. Secondly, if you use a donor advised fund like Fidelity Charitable Gift or Vanguard Charitable Fund, you can still decide when to ultimately put that money in the hands of the charity based on when and how you make grant recommendations. Obviously, you need to be supporting a real 501(c)3 charity or you risk your grant recommendation being denied, but for most of you that should not be a problem. There you have it, how to get more bang for your charitable buck while potentially reducing your income tax bill. Let me know your thoughts or ideas. Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.
0 Comments
 Last week I attended the life celebration for one of my favorite clients who passed away recently at the impressive age of 100. Interestingly enough that individual's life celebration event was held on the date that client would have been 101. As you might expect, the celebration began with family telling how much she meant to them. Many tears were shed! It then transitioned to both local and national charities providing testimonials about this client’s big heart and focused charitable mission. Interspersed between live speakers and video pieces were more video clips of this incredible person’s goals to support childhood education as a way to hopefully keep some of those kids from becoming crime statistics. This person’s belief was that early childhood education and education in general could reduce the worlds’ overcrowded prisons. Whether you concur or not two things struck me: First, how focused this client was in giving and second, what a difference this client made as result of being focused in giving. The whole event made me re-examine how I/we were giving and wonder aloud with my wife if we were as focused as this client. As a result, we came up with five ways to realign our charitable giving with our passion. Here they are: 1. Find Your Passion This is one is almost self explanatory. I have been on enough charitable boards to tell you that unless you are passionate about something, it will just get old in a hurry! I distinctly remember one such education related board position I took just for the perceived networking value. Not only was I not passionate about the organization’s mission, but my lack enthusiasm for its mission actually showed to those I met and worked against me in my networking. Of course the complete opposite has been the case with my involvement with many other organizations where my excitement level led me to great satisfaction, better relationships and better results. 2. Align Your Mission With Your Passion Here the simple action step is find your passion and then align where you spend your time, give your treasures (funds) and use your talents with that passion. After this client’s celebration, my wife and I sat down and determined that our passion was still for international missions. International missions that either make or train disciples, support the oppressed or care for orphans. This newly aligned mission and passion is the sweet spot for our giving. 3. Cull The Dead Wood Hopefully by this point you have a pretty good idea of what you are passionate about and how to align your mission with that passion. The next step is to see where you are giving of your time, treasures and talents and eliminate those charitable activities that no longer fit with your mission. This quite frankly can be the though part as I have never met a charity that did not need additional resources and here you are pulling back those valued inputs. However, like my failed foray into the world of educational charities, the world will be a better place in the long-term if you are truly passionate about your giving. My suggestion is you set a date in the future, give them proper notice of at least 90 days and then soften the blow a bit with the reason you are pulling back your giving. They will respect you for your candor, even though they may not be excited about its impact on them. 4. Determine How Best to Use Your Time, Treasures or Talents Hand and hand with culling the dead wood is the process of determining the best uses of your resources. As a result of your cull of certain charitable activities, you may have extra time, funds or talents to lend to the right charity. You may decide that you already have the right charities and now its just a matter of realigning your available resources with that slimmed down list. The point here is to develop a plan to maximize the impact of your giving on existing or possibly new organizations where your mission can best be met. 5. Measure Your Impact The final step is to measure your results and fine tune your giving. This is the measurable part of goal setting. What do you hope to accomplish, over what time period and what does an acceptable result look like? Remember this is a process, you may need to periodically reassess your commitments to keep them in line with your goals. Let me know what you think in the comments below. Written By: Jeff Diercks In case you missed it, Congress in late December permanently extended the exclusion from income of up to $100,000 per person per annum of Individual Retirement Account (IRA) distributions given directly to qualfied 501(c)3 charities for those already over the age of 70 1/2.  n
This popular exclusion lets a taxpayer give to charity directly from their IRA, treat the distribution as part of their Required Minimum Distribution for the year and avoid tax on that distribution. The downside is you don’t get an itemized deduction for the charitable gift and you cannot receive anything in return for the gift from the charity as quid pro quo for your contribution. There are a few other restrictions such as the gift cannot go to a donor advised fund, private foundation or supporting organization. Also you cannot make the gift from a Simplified Employee Plan (SEP) or a Savings Incentive Match Plan for Employees (SIMPLE plan) if an employer contribution was made that year. Who is this be best for? Anyone who wants to give cash to a charity. What would possibly work better? The only one we could think of was a gift of appreciated property whereby you avoided the capital gain on the gift to charity. For more information, check out this article on Forbes/Personal Finance. |
© 2025 InTrust Advisors, Inc. All Rights Reserved
This site is designed for U.S. residents only. The services offered within this site are available exclusively through our U.S. financial advisors. InTrust Advisors U.S. financial advisors may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.
CONTACT US | PRIVACY POLICY | DISCLOSURES | VIEW OUR FORM ADV 2 A & B | VIEW OUR FORM CRS | INTRUST FAQ
TAMPA, FLORIDA / PHONE: 813.253.2388
EMAIL: [email protected]
This site is designed for U.S. residents only. The services offered within this site are available exclusively through our U.S. financial advisors. InTrust Advisors U.S. financial advisors may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state.
CONTACT US | PRIVACY POLICY | DISCLOSURES | VIEW OUR FORM ADV 2 A & B | VIEW OUR FORM CRS | INTRUST FAQ
TAMPA, FLORIDA / PHONE: 813.253.2388
EMAIL: [email protected]