September 2023
Financial Planning

Financial Planning

By Javier Jimnez

Are you charitably inclined? If so, you may consider the following tax-efficient strategies: a Qualified Charitable Distribution (QCD) or gifting appreciated securities.

A QCD allows an individual who is 70.5 years old or older to donate up to $100,000 per year directly to one or more eligible charitable organizations from an IRA. For someone who has reached their Required Minimum Distribution (RMD) age, a QCD helps to satisfy all or a portion of the RMD amount.

Below are 2 scenarios to illustrate the tax benefit for a retired married couple over the age of 70.5 filing jointly in 2023 taking their $110,000 RMD and donating $15,000 to an approved charity:

Another strategy is to gift appreciated securities from a taxable or non-retirement account to a charity. Most qualified charitable organizations will accept stock as a gift or donation. This works well when you own stocks with long-term capital gains (held for 1 year or more) that have appreciated in value. When you donate appreciated stock instead of cash, the stock’s fair market value may be itemized as an income tax deduction, and you don’t pay taxes on the appreciation. If you have extra cash on the sidelines, you can also buy additional shares of that stock to reset its cost basis.

You can also donate stock to a charity by way of a donor-advised fund (DAF). In this case, you can transfer the stock you wish to donate to the DAF and eliminate capital gains on the sale of the stock. You can decide at a later date what charity to donate the stock to.

There are a lot of moving pieces when it comes to tax strategies, so we suggest talking to your advisor for the recommendation best suited for your tax situation.

If you have questions, please contact us.

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