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4 Tax-Smart Charitable Giving Moves

Ways to Maximize the Benefits of Your Philanthropic Gifts
| By: Randall E. White, CFP®, RICP®, CRPC®, CMFC®

4 Tax-Smart Charitable Giving Moves
Tuesday, 19 April 2022

Practicing philanthropy is a very personal decision. More often than not, it’s about more than money – it’s about your values, passions, and vision for the future. However, even if saving money on your taxes isn’t your main reason for giving back, there are still several tax benefits that come from charitable giving that shouldn’t be overlooked.

Below we’ll discuss four tax-advantaged ways that you can make a charitable gift.

1.     Appreciated Stock

Donating appreciated stock comes with a few tax advantages. First, you may qualify for an immediate tax deduction based on the current value of the stock. You’ll also be able to avoid paying capital gains that you would owe if you had sold the appreciated stock instead. And, because you’re donating the stock itself rather than the taxed proceeds you’d get from selling the stock, you’ll be able to maximize the amount of money that you’re giving to the charity – making this a win for you and for the cause you’re supporting.


SEE ALSO: Your Retirement Tax Prep List


2.     Qualified Charitable Distribution

Owners of traditional IRA accounts can use their required minimum distributions (RMDs) to provide financial gifts to charities they’re passionate about. Account owners that are 72 or older are required to withdraw a certain amount from their retirement accounts each year, which they then pay income tax on – even if they don’t need that money to live on. However, the IRS allows you to donate up to $100,000 per year as a tax-free gift to 501(c)(3) charities instead.

This is called a Qualified Charitable Distribution and it comes with quite a few benefits. Not only are you satisfying your RMD requirement, but you’re avoiding having to pay taxes on it while supporting an organization that you’re passionate about. Additionally, since the IRS won’t be counting the RMD as income, you avoid being pushed into a higher tax bracket.

3.     Designating a Charity as a Beneficiary of a Qualified Retirement Plan

If you list an individual as the beneficiary for qualified retirement plans such as a 401(k) or an IRA, they’ll be required to pay income tax on those assets. However, if you list a charity as the beneficiary, they don’t have that same requirement, meaning they’ll get the full amount of your retirement account. This not only saves your heirs from the burden of an income tax bill, but it also helps you to maximize your charitable dollars.


SEE ALSO: Health Savings Accounts Offer a Tax Break for High-Earners


4.     List a Charity as a Beneficiary in Your Will

For similar reasons, it can be a smart move for those without children or with larger estates to list a charity or charities as a beneficiary in their will, as it helps to bypass estate taxes. This can be an important tool for reducing – or even eliminating – the estate tax because the estate can deduct any charitable bequests of cash or other assets you have.

Are You Practicing Tax-Savvy Giving?

Philanthropy allows you to truly change lives, make a positive impact in your community or beyond, and do something good for your soul, too. Charitable giving not only helps to address critical needs in the world, but by giving back, you’re setting a great example for the next generation on the importance of philanthropy. By giving back in ways that come with tax advantages, you can optimize your giving, both for your own benefit and so that you’ll have more resources to give in the future.

At TriCapital Wealth Management, we are committed to making a positive impact in our community and empowering our clients to make a difference, too. If you’re looking to incorporate some tax-savvy philanthropic strategies into your wealth management plan, contact us today.  


Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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