The new tax law is hopefully going to save you some cash, or at least you’ll be about equal. Though, there is one big potential negative impact
Consider a typical successfully retired couple. The new standard deduction is $24,000 per married couple filing jointly. State and local (property) taxes are now capped at $10,000. Most retirees don’t have mortgages so no deduction there, which could leave $14,000 in
Now, I know tax deductions aren't the only reason people donate, but for people who pay a lot of
There is a silver lining to this cloud, however. Planning techniques for donations can help retires still keep parts of the tax benefits alive.
As always, check with your CPA because there are a number of techniques. Two of the common ones we are seeing are Donor Advised Funds and Qualified Charitable Contributions.
- Donor-advised funds are great because you can donate some of your most highly appreciated after-tax stock to the account, then use it like a checkbook to fund your charities. It also allows you to bunch your charitable contributions in certain years, so you get the most tax deduction possible. For example, I had a client recently put in five years worth of church donations to a Donor Advised Fund. The stock was immediately sold in the account, so no tax to them, and it was a completed gift from the IRS’s standpoint. Now the church automatically gets a check every month for their regular donation. It’s neat, too, that the cash doesn’t just sit there. They decided to invest it in some stocks and bonds, so the church and their other charities will hopefully get some growth over the next several years. When the account runs out, they plan on making another contribution of appreciated stock to get them well over the standard deduction.
- Qualified Charitable Contributions can be made directly from your retirement accounts to your favorite charities. One of the best things about this is it also qualifies toward your required minimum distribution. This didn’t
usedto be the case! There are a lot of very charitable people who don’t need all of the money the government makes them take out of their IRA’s each year. So this might be a wonderful solution. The limit is $100,000 per year, you have to be 70 ½, and there are other considerations.
If you want to brainstorm around these changes and your specific situation please let us know. We are here for you.
Thanks for taking a look!
Tom Gartner, MSAPM, CFP®
This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.