Helping Others the Tax Advantaged Way

by Kelly McCune | Nov 08, 2018
As we head into the holiday season, many of our favorite charities are reminding us to give generously. But before you write that check, DOUBLE CHECK with your financial advisor!

We wanted to remind you of two alternatives to giving cash that can potentially reduce your tax burden and benefit your favorite qualified charities.

Donate highly appreciated assets
Assets that have grown in value are always an option when considering how to give. Earners in the highest income tax brackets should especially consider donating non-cash gifts like stock. Stock with a low initial purchase price may have appreciated considerably. The donor can avoid the large capital gains that come with selling highly appreciated stock by donating the stock to a qualified charity.
 
Consider a Qualified Charitable Distribution (QCD) from your IRA
IRA Owners over age 70.5 and some IRA beneficiaries are required to take a minimum distribution (RMD) from the IRA. The amount required is based on the life expectancy of the IRA owner. Failure to distribute the required amount could result in a 50% penalty on the RMD amount. And remember – those RMDs are also taxed as ordinary income!
 
Because the RMD is taxed as ordinary income, managing it is essential to financial planning. For example, since Medicare premiums are based on taxable income, RMDs can raise your Medicare premium rates substantially. 

RMDs also can raise your overall tax bracket.
 
When making a QCD, the IRA owner donates all, or part, of the RMD to a qualified charity and the distribution is not included in the IRA owner’s taxable income. This is a tax-efficient way to meet RMD that doesn’t require itemizing taxes. The 2018 maximum amount allowed as a qualified charitable deduction is $100,000 per person. 
 
For more information about structuring your charitable giving, please contact Morgan Stone or Kacie Swartz at info@stoneasset.com or 512-469-9152.