RL043 - Retirement Lifestyle: 7 Tax Secrets Of Smart Givers

On this episode of the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson talk about charitable giving and how to get the best out of your philanthropic efforts. They discuss the different strategies that can help you receive the total tax benefits from your charitable giving. As a parting shot, they highlight the more significant benefits that come with charitable giving.

[02:55] Charitable Giving

[03:12] Giving Long Term Appreciated Securities Rather Than Cash

[09:50] Examples of Appreciated Securities That Can be Gifted out

[13:23] How to Donate Complex Assets

[15:38] Real Estate Gifting

[18:17] Gifting Business Units

[28:40] The Bunching Strategy

[38:50] Charitable Deductions using IRA Conversions

[50:37] Charitable Remainder Trust

[53:26] Qualified Charitable Deductions

 

To read the Full Show Notes scroll down or click here.

  • Roshan Loungani can be reached at roshan.loungani@aretewealth.com or at 202-536-4468.
  • Erik Olson can be reached at erik.olson@aretewealth.com or 815-940-4652.
  • Adrian Nicholson can be reached at adrian.nicholson@aretewealth.com or at 703-915-8905

 

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Full Show Notes:

Giving Long-Term Appreciated Securities Instead of Cash

As we approach the end of the year, the number one topic on most people’s minds is charitable giving. With the tax laws changes a couple of years ago, many people struggle to get tax benefits from their charitable giving. This usually makes some people shy away from giving since they want to give in a way that they get to enjoy some tax benefits. The first thing you need to understand is that there is a difference between giving and donating. Giving won’t accumulate any taxes but donating certainly will. 

 

Donating Complex Assets

Donating complex assets is all about contributing a portion of your company to a charity organization. Some charities might not accept this form of giving because of all the details involved, but this strategy will be good for your taxes in the long run. If you feel like you have a stronger connection with the asset at hand, you can go back and buy back the assets, thereby ensuring that the charity organization gets the money and you retain the stocks. However, the thing to note here is that the stock needs to have appreciated. If it’s a depreciated stock, you are better off selling it. 

 

Gifting Units of a Business

Before you gift business units to a particular organization, you must first value the business to estimate how much the units are worth. The second thing would be to find out if the charity accepts these types of transactions, and if not, you’ll have to look for a donor-advised fund. The donor-advised fund will sell the units and give the proceeds to your charity of choice. The beauty of this is that if you give more than 51% of the business, you can structure the company so that you still get to make crucial decisions concerning the company. 

 

The Bunching Strategy

One of the lesser-known tax deduction strategies that are effective when thinking about tax savings is the bunching strategy. In this strategy, people can ensure they receive the full tax benefit from their philanthropic efforts by bundling together two or more years of charitable donations into a single year. This strategy of bunching several years of charitable gifts into one year can push taxpayers above the threshold for itemizing deductions that year and provide them with a deduction for their donation’s full value. In alternate years, taxpayers could give less or fail to give and simply claim the standard deduction.

 

Conversions from Traditional to Roth IRA

The Roth IRA is an investment strategy that can experience both accumulations and distributions tax-free when done right. Suppose you are thinking about converting your traditional IRA to a Roth IRA. In that case, you may be able to lessen the tax impact through charitable giving if you itemize deductions on your tax return. A common issue with converting a traditional IRA to a Roth IRA is how to pay for the income tax generated from the conversion. By giving cash, stock, mutual funds, or real estate to a charity organization, you get to receive a charitable deduction that may be used to offset some of the taxable income generated from a Roth IRA conversion.

 

Charitable Remainder Trust

A charitable remainder trust is an irrevocable trust that generates a potential income stream for you or other beneficiaries, with the remainder of the donated assets going to your favorite charity. This charitable giving strategy generates income and can enable you to pursue your philanthropic goals while covering your living expenses. Charitable trusts can offer flexibility and some control over your intended charitable beneficiaries and lifetime income, thereby helping with retirement, estate planning, and tax management.

 

Qualified Charitable Deductions

A qualified charitable distribution allows individuals who are 70½ years old or older to donate up to $100,000 total to one or more charities directly from a taxable IRA instead of taking their required minimum distributions. As a result, donors may avoid being pushed into higher income tax brackets and prevent phaseouts of other tax deductions. The first limitation of this strategy is that the money can never go to an account bearing your name; it has to go to charity. 

Disclaimer Welcome, you are now listening to the retirement lifestyle show with Roshan Loungani Erik Olson and Adrian Nicholson. This show is an exploration of ideas to help you work towards your ideal retirement. Roshan Loungani and Erik Olson serve clients across the US. They offer financial planning and investment advice through Arete Wealth Advisors, LLC, an SEC registered investment advisor and securities through Arete Wealth Management LLC, member FINRA, SIPC, and NFA. Get ready for the financial independence of your dreams. All opinions expressed by podcast hosts and guests are solely their own are based on information they believe is reliable. Neither Arete Wealth nor its affiliates, warrants its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only and should not be regarded as specific advice or recommendations for any individual. Before making any decisions consult a professional. Finally, our music is the chance by Jason Shaw and Audionautix. It’s part of the YouTube Audio Library and it’s licensed under a Creative Commons license.

Thank you for listening.

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