This week’s data showed a mixed bag of results, but in all, the economy remains on solid ground. Does that mean we will avoid a pullback? Annex Wealth Management’s Derek Felske and Danny Clayton discuss.
Last month, the IRS released their annual “Economic Well-Being of U.S. Households” report, which assesses how adults feel about their financial situations and outlooks.
One area that was surveyed was Retirement and Investments. Naturally, that catches our eye! Participants were asked about their retirement savings, to which over three-fourths of non-retired adults said they had at least some sort of retirement savings.
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The Difference Maker Of The Game
Brewers vs. Blue Jays | June 1, 2023
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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 2023, the Internal Revenue Code allows us to deduct from income the larger of the standard deduction ($27,700 for married couples filing jointly) or the total of all other deductions, called itemized deductions. Itemized deductions include state and local taxes paid during the year, 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. However now, most people take the standard deduction. In order to get a tax benefit from charitable contributions, you typically must be itemizing.
Donation bunching is a strategy where several years’ worth of charitable donations is made 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, while also fulfilling charitable gifting desires.
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. Once you are subject to required minimum distributions (RMDs), the QCD can be used to reduce or fully satisfy the RMD without having to recognize the QCD amount as income.
Take a look at your unique situation and consider the different ways to give to make your philanthropic efforts as tax efficient as possible.
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