Plan Your Philanthropy
As we approach the end of the calendar year, you only have a few months remaining to take advantage of certain planning opportunities.
In this four-part series, we’ll cover a range of planning topics that can help you save on taxes as you work toward achieving your financial objectives. If you’re a corporate executive, you’ll find that some of these topics are particularly relevant to you as year-end gets closer.
In our third blog post of the series, we explore different philanthropic planning strategies designed to help you improve the tax effectiveness of your charitable giving.
Give cash
As a result of the COVID-19 pandemic, 2020 and 2021 presented unique opportunities for gifting cash. The temporary CARES Act made cash gifts deductible up to 100% of adjusted gross income (AGI)).1 That was an exceptional circumstance for saving on taxes, but now the deductible for cash gifts has reverted to the standard 60% limit.2 Even at 60%, it remains compelling for many individuals and may provide for a healthy deduction on your income tax return.
Also, the annual gift tax exclusion amount was increased to $17,000 for 2023 (and to $34,000 per married couple)3, so you may gift up to that amount to another person without tax implications. If you happen to have several family members on your gift list, each may receive up to $17,000 in cash annually with no tax consequences for you.
Give appreciated stock
A wonderful way to diversify your portfolio, especially if you hold concentrated equity positions, is to donate appreciated stock. This proven giving strategy comes with several benefits Here are four:
- You get a tax deduction for the fair market value of the stock.
- You avoid paying capital gains tax.
- You may rebalance your portfolio or diversify a concentrated position.
- You can make a meaningful difference with your charitable giving.
You do need to have held the stock for more than a year, and your deduction is limited to up to 30% of your AGI, assuming that you’re donating to a public 501(c)(3) charity. Any unused deduction may be carried forward for up to five years.
Create a donor-advised fund (DAF)
If you’re unsure which charities you’d like to support but know that you’d like to make a charitable gift this year, setting up a DAF could be a viable option. You’ll receive a tax deduction in the year you contribute the funds to your DAF, but you can make grants over an indefinite number of years from the DAF to your selected charities.
DAFs can help offset your tax burden in high income years while funding your philanthropic efforts for years to come. Many of our clients believe their DAFs have additional benefits besides tax management, including making it easier to give and involving the next generation in their philanthropic endeavors.
Make a qualified charitable distribution (QCD)
For people age 70½ or older with a traditional individual retirement account (IRA), a QCD is generally a tax-advantageous way to give. QCDs are checks made directly from your IRA to charities. Not only do they fulfill your required minimum distributions (RMDs), but they’re also excluded from your gross income. There are many potential tax benefits as a result.
Currently, an IRA owner may give up to $100,000 annually ($200,000 per married couple) in QCDs.4 Note that QCDs cannot be made to a DAF, so your Corient Wealth Advisor and tax advisor can help you determine whether QCDs are appropriate for your charitable giving situation. Even before the SECURE 2.0 Act, QCDs represented a tax-efficient way to support charitable organizations. Now, with the passing of the SECURE 2.0 Act, the QCD has become even more attractive. Previously, the $100,000 limit was not indexed for inflation, but beginning in 2024, the top allowable amount will be indexed on an annual basis, potentially saving you more in taxes.
Here to support you
The opportunities for year-end planning are many and varied, and each brings its own complexity depending on your particular circumstances. Be sure to engage your Corient Wealth Advisor, as well as any tax and/or legal advisors you may work with, to determine what strategies are best for you.
Other topics in this series:
- Part 1: Coordinate Tax Planning with Your Advisors
- Part 2: Optimize Your Retirement Plan Contributions
- Part 4: Review Your Gifting and Estate Plans
1 https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
2 Title 26-USC 170: Charitable, etc., contributions and gifts
3 https://www.nerdwallet.com/article/taxes/gift-tax-rate
4 https://www.irs.gov/newsroom/reminder-to-ira-owners-age-70-and-a-half-or-over-qualified-charitable-distributions-are-great-options-for-making-tax-free-gifts-to-charity
ABOUT THE AUTHOR
Hope Carlson, CFP®, CAP®
Hope is a Partner, Wealth Advisor in our San Diego office. She joined legacy firm Dowling & Yahnke in 2017. She is a CERTIFIED FINANCIAL PLANNER™ professional and holds the Chartered Advisor in Philanthropy (CAP®) designation.
Prior to Dowling & Yahnke, Hope spent six years as the chief development officer at the Museum of Us, overseeing fundraising and marketing. She also served as the interim executive director for the San Diego Civic Youth Ballet in Balboa Park and for four years as a strategy consultant with the Boston Consulting Group.
Hope holds a Master of Business Administration (MBA) from Harvard Business School, where she was a Baker Scholar, graduating in the top 5% of her class. She also obtained her Master of Music in Vocal Performance and Literature from the Eastman School of Music and a Bachelor of Arts in Economics with Highest Distinction from the University of Virginia.
Trained as an opera singer, Hope is passionate about music and the arts. She lives in La Jolla with her husband and two daughters.
Michael Brown
Mike is a Partner, Wealth Advisor in our San Diego office. He has more than 25 years of professional experience advising clients on strategic financial matters, including business exit planning, tax planning, generational wealth transfers and estate planning, investment management, charitable giving and retirement planning.
Mike joined legacy firm Dowling & Yahnke in 2012 and was a partner at Deloitte prior to that. He holds the Chartered Financial Analyst® and CERTIFIED FINANCIAL PLANNER™ certifications, is licensed as a Certified Public Accountant (CPA) and has a Master of Business Administration (MBA) degree from the Kellogg School of Management at Northwestern University. Mike completed his undergraduate work at Oakland University (Michigan), where he majored in accounting and graduated summa cum laude. He grew up in Michigan and enjoys outdoor activities such as golf and skiing. Mike has been married to his wife, Jennifer, for more than 25 years and has two daughters.
CONTENT DISCLOSURE
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. This does not constitute an offer to provide any services, nor a solicitation to purchase securities. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include opinions or forecasts, including investment strategies and economic and market conditions; however, there is no guarantee that such opinions or forecasts will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
Advisory services are offered through Corient Private Wealth LLC and its affiliates, each being a registered investment adviser (“RIA”) regulated by the U.S. Securities and Exchange Commission (“SEC”). The advisory services are only offered in jurisdictions where the RIA is appropriately registered. The use of the term “registered” does not imply any particular level of skill or training and does not imply any approval by the SEC. For a complete discussion of the scope of advisory services offered, fees, and other disclosures, please review the RIA’s Disclosure Brochure (Form ADV Part 2A) and Form CRS, available upon request from the RIA and online at https://adviserinfo.sec.gov/. We also encourage you to review the RIA’s Privacy Policy and Code of Ethics, which are available upon request.
Our clients must, in writing, advise us of personal, financial, or investment objective changes and any restrictions desired on our services so that we may re-evaluate any previous recommendations and adjust our advisory services as needed. For current clients, please advise us immediately if you are not receiving monthly account statements from your custodian. We encourage you to compare your custodial statements to any information we provide to you.