Guest Blog Courtesy of Chartway Promise Foundation President and Certified Fundraising Executive (CFRE), Christine Wilson
Ah, Tax Day – the annual rite of passage that millions of Americans dread. As we file our tax forms and some of us begrudgingly stroke a check to Uncle Sam, we can’t help but wonder if there’s a way to reduce our tax burden and keep more of our hard-earned cash. Well, my friends, fear not! We're sharing savvy strategies that do just that and let you do some good in the world. It’s a win-win: you get to support the causes you care about while also reducing your taxable income!
While many people know that making a simple online donation to a registered 501(c)(3) organization can reduce your tax burden, most don’t know about other strategies that can be far more effective. Here’s how you can turn your charitable giving into a tax-saving superpower:
Qualified Charitable Distributions: Your Tax-Free Superhero Move
If you are 70½ or older and have a traditional IRA or 401(k), you can use your required minimum distributions (RMDs) to make charitable donations. This nifty move is called a Qualified Charitable Distribution (QCD), and it’s like a tax-free hero’s cape for your retirement savings. By donating straight from your retirement account, you avoid paying taxes on that distribution, receive a tax deduction, and it won’t increase your adjustable gross income (AGI). Keeping a watchful eye on your AGI can help manage Medicare costs which in turn can help you keep even more money in your pocket.
Learn more here*.
Gifts of Appreciated Stocks: Turning Paper Gains into Real Wins
Normally, when you sell an appreciated stock, you pay capital gains taxes on the profit you previously only saw on paper. But what if you could skip that tax hit and still get a tax break for your generosity? That's where gifting appreciated stocks directly to charity comes in – you won’t pay capital gains tax on the appreciation of the stock, and you’ll still get a charitable contribution deduction. You might even be able to afford a larger gift to charity since you aren’t spending cash on hand. Those paper gains are now a win for you and the cause you support!
Learn more here*.
Donor Advised Fund: The Tax-Smart Way to Spread Your Giving Wings
With the current standard deduction being a hefty $25,000 for individuals and $50,000 for couples filing jointly, many of us don’t donate enough on a yearly basis to surpass the standard deduction. But never fear! A Donor Advised Fund (DAF) lets you spread your giving wings over multiple years with your own personal charitable nest egg that keeps on giving! You’ll simply make a large donation in one year (claiming the tax deduction in the year you establish and fund the DAF) and then direct giving from the fund over multiple years – without a specified timeframe and with the ability to continue making new contributions. Once money is contributed to a DAF, it cannot be taken out of the fund other than for charitable disbursements. However, you and/or your heirs maintain control of it for the life of the fund.
Learn more here*.
Reducing the Tax Burden on the Next Generation
Choosing a non-profit as the beneficiary of your traditional IRA or 401K account not only provides needed funds for your community but will help alleviate the tax burden on your heirs. These retirement vehicles are treated differently than other inherited assets and withdrawals/disbursements are taxed at the inheritors rate. The accounts must be fully withdrawn within 10 years of the IRA owner’s death which could increase the tax rate of the inheritor.
Learn more here.
Gifts That Keep on Giving (Back to the Community)
Let's not forget the real reason we're talking about all these tax-savvy strategies: to support the amazing organizations that make our communities better places to live. Gifts to local charities strengthen our communities; they stock food pantries, provide learning opportunities, build playgrounds, fund scholarships, keep gardens blooming, and so much more!
At Chartway, we value community because the people we serve and the places they live are connected and thrive together. That’s why we’re so proud of our charitable arm, the Chartway Promise Foundation, which invests in brightening the day for medically fragile children and their families.
Chartway Promise Foundation partners with local charities to bring memorable experiences to the children and families they serve. Whether it is toy bags for our children’s hospital emergency rooms, right-sized mobility equipment for the youngest of heroes, fishing trips for pediatric cancer families, summer programs for autistic campers, eyeglasses for children who need them, and of course, providing dream trips and wishes come true, the foundation impacts the children of our community and can use your help.
To learn more about how you can support (and possibly reduce your tax burden), please visit the foundation website at ChartwayPromiseFoundation.org. And remember, these strategies can be complex, so it's always a good idea to consult your tax and financial advisors to see if they're the right fit for your situation. For more information about Chartway Investment Services, click here.*
*Securities and Advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Chartway Federal Credit Union and Chartway Investment Services are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Chartway Investment Services, and may also be employees of Chartway Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of, Chartway Federal Credit Union or Chartway Investment Services. Securities and insurance offered through LPL or its affiliates are not insured by NCUA or any other government agency, not credit union guaranteed, not credit union deposits or obligations and may lose value.
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