Ways to Maximize Your Charitable Impact - Part 1
By: Mark Boujikian, CFP®
Harris Financial Advisors, Torrance, CA
(310) 791-3226
We all want to make a difference and feel confident that difference is felt by both our favorite charity, and ourselves. In Part 1 of our series, we are going to look at two ways to give that help us to make the biggest impact on our charity, while also receiving the most favorable tax treatment the tax code offers to help us build wealth:
Appreciated Securities
• Giving appreciated stocks or mutual funds gives you two tax breaks. The first is the ability to deduct the current value of the investment as a charitable deduction on your tax return if you itemize deductions. The second is the avoidance of paying capital gains taxes on any profits that may have been realized.
Direct Transfer from your IRA for IRA Owners Age 70 ½ or Older
• A proposal to make charitable contributions from IRAs, also known as the Qualified Charitable Distributions (QCD), permanently tax deductible is currently being considered in Congress. This would make charitable contributions up to $100,000 made directly from IRAs excluded from income while satisfying required minimum distributions (RMD).
By reducing income (AGI) other benefits may accrue to the taxpayer. Some examples are avoiding limitation of itemized deductions, and the full use of deductible medical expenses or miscellaneous itemized deductions. Importantly, using this QCD option can serve to avoid an increase in the taxation of your Social Security benefits.
Should Congress not approve the QCD proposal, you can still claim your charitable deduction as an itemized deduction on Schedule A of your tax return. This is a great way to potentially reduce income tax, satisfy RMDs, and benefit your favorite charity.
As with any charitable giving technique, ALWAYS consult with your financial advisor, tax advisor, estate attorney, and many times, with the charities themselves to explore your options and find out how to maximize your gift and improve your bottom line, a win/win scenario for you and your favorite charity. Stay tuned for Part 2 of our series for two more giving techniques that could even further maximize your impact, and your tax savings…
