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Make the Most Out of Your Charitable Giving This Year

Jeff Gurman guides us through the steps to help us make the most of our charitable giving in our end-of-year taxes.

How can taxpayers make the most out of their charitable giving? 

Here is a great end-of-year hack for the charitably inclined: If you have appreciated assets and plan to make a charitable contribution before the end of the year, you should consider donating that highly appreciated asset to your Donor Advised Fund (DAF) or your favorite charity. Why? Let’s say you plan to donate 100K to charities this year. If you donate 100K of bitcoin (that you bought for 10K), you could take a 100K charitable deduction when you itemize. If you like your bitcoin, you could buy it back with a new 100K cost basis at the same time. On the other hand, if you sold the crypto, you have 90K of Capital Gains subject to Cap Gains tax (Short term or Long term) and both fed and state and possibly the 3.8% net investment tax. Maybe it cost you 33% or more ($30K+ in taxes) and you still only get to write off 100K from your donation. On balance, donating highly appreciated assets is a smart move.

Donor Advised Fund

If you invest in private equity, this one is for you! I know that many investors do tax planning in December and inform their CPAs that they had an amazing exit from a private company during the year. Their CPA may recommend offsetting the tax burden by donating money to their favorite charity. Or if you tithe, you may plan to donate 10% of that windfall. Donating some of that stock right before the “exit” to your favorite charity or DAF would have been a very smart move.

I mentioned the Donor Advised Fund (DAF). You can think of a DAF as a charity of your own. You can set it up at Fidelity or Renaissance (RCF) or many other custodians. And you can make a charitable donation to your DAF at any time and take the itemized tax deduction in the year you made the gift. At any time in the future, you can make a request to have the DAF send any amount you want to any 501c3 of your choosing. You can even set up automatic monthly donations if you want. Furthermore, the DAF is a very convenient way to accelerate deductions in order to take advantage of being able to itemize if you are on the cusp of taking the standard deduction.

Qualified Charitable Donation

Another great strategy for the charitably inclined is the Qualified Charitable Donation (QCD). A QCD is a direct transfer of funds from your IRA, payable directly to a 501c3, including your DAF. The QCD would help satisfy your RMD for the year and you can donate up to $100,000. For high income earners over 72, who do not have beneficiaries, this is an especially great idea.

This strategy could be much better than taking the RMD as income and later donating the same amount to charities. Why? If you take the RMD as income, instead of as a QCD, your RMD will count as taxable income. This additional taxable income could push you into a higher tax bracket and could also reduce your eligibility for certain tax credits and deductions. As an example, your taxable income helps determine the amount of your Social Security benefits that are subject to taxes. This strategy could also help reduce the possibility of the 3.8% Medicare surtax on cap gains.

Happy Holidays and expect a “thank you” from your favorite charitable cause!

The above information should not be considered tax advice as you should always consult with your tax professional before making any tax decisions.

Jeff Gurman, Gurman Wealth Management, Inc

See medical disclaimer below. ↓


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The ideas expressed here are solely the opinions of the author and are not researched or verified by AGEIST LLC, or anyone associated with AGEIST LLC. This material should not be construed as medical advice or recommendation, it is for informational use only. We encourage all readers to discuss with your qualified practitioners the relevance of the application of any of these ideas to your life. The recommendations contained herein are not intended to diagnose, treat, cure or prevent any disease. You should always consult your physician or other qualified health provider before starting any new treatment or stopping any treatment that has been prescribed for you by your physician or other qualified health provider. Please call your doctor or 911 immediately if you think you may have a medical or psychiatric emergency.

Jeff Gurmanhttps://gurmanwm.com
Jeff Gurman founded Gurman Wealth Management, Inc with the express intent of helping his community with important financial, insurance and estate planning issues. Jeff has been providing financial services and advanced tax and risk mitigation strategies to successful businesses and individuals since 1990.


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