The Fed continues to try to play catch up as the markets tumble, but some sectors have been deeply in bear territory for a while. Is a bottom in sight? Annex Wealth Management’s Dave Spano & Derek Felske discuss.

In our recent poll, we asked readers to get their children involved. “Money Questions To Ask Your Adult Children” featured several discussion points including:

  • “Do You Foresee Situations That Could Cause Friction With Siblings & Dependents?”
  • “Do You Have The Appropriate Insurance Policies In Place?”
  • “Are Your Financial Documents In A Safe Place?”
  • “Have You Spoken With Your Child/children To Expect An Inheritance?”

Annex Wealth Management’s Financial Planning Manager, Eric Strom, CFP®, EA dives into reader responses.


Understand Your Charitable Planning Options

Are you giving to charity in the most tax-efficient way? There are several different options when it comes to donating to your favorite charities. Donations can be made with cash, appreciated securities, or tangible assets, such as donating clothing to Goodwill. There are limits on the amount of charitable deduction allowed depending on the type of asset donated and the type of charity receiving the donation. In this week’s MoneyDo, we suggest you review your financial situation to understand how to be tax efficient with your charitable gifts.  

It’s important to first understand the difference between itemized deductions and the standard deduction. For tax year 2022, the Internal Revenue Code allows us to deduct from income the larger of the standard deduction ($25,900 for married couples filing jointly) or the total of all other deductions, called itemized deductions. Itemized deductions include state and local taxes, mortgage interest, medical expenses, and charitable donations. 

The Tax Cuts and Jobs Act of 2017 greatly increased the standard deduction. Before this, many Americans were itemizing their deductions. Whereas now, most people take the standard deduction. In order to get a tax benefit from charitable contributions, you typically must be itemizing.  

Donation bunching can be used to make several years’ worth of charitable donations during the same calendar year to benefit from itemized deductions. A donor advised fund (DAF) is often used to accomplish this. A DAF can be front loaded with several years of donations and the taxpayer gets the tax benefit in the year of the contribution. The donor can then direct donations to qualified charities over time as they please. 

As mentioned above, one strategy of charitable giving is a donation of appreciated securities. By donating securities directly to a charitable organization or donor advised fund, you avoid realizing capital gains and paying taxes on the eventual sale of those securities. This is a great way to remove highly appreciated securities from your portfolio without causing a taxable event. 

Lastly, qualified charitable distributions (QCDs) can be considered once you are age 70½. QCDs allow you to donate up to $100,000 annually from your IRA directly to charity, regardless of whether you take the standard deduction or if you itemize. Upon attainment of age 72 when required minimum distributions (RMDs) begin, the QCD can be used to reduce or fully satisfy the RMD without having to recognize the QCD amount as income. Between ages 70½ and 72 when there is no RMD requirement under current law, you can use a QCD to reduce the balance in your IRA. This reduction in IRA balance helps decrease future RMD amounts and the taxes associated with them. 

Take a look at your unique situation and consider the different ways to give to make your philanthropic efforts as tax efficient as possible.