3 Ways to Support Charities You Love While Keeping More Money for Yourself in Retirement
Women are natural givers – sometimes to our detriment – and as such we need to understand the safe boundaries (how to help, not hurt) around sharing what we have.
We also want to be wise in utilizing our financial resources for charitable intentions, so we need to consider our own personal needs, the changing market environments and tax laws.
Women are more likely to give in areas that speak to their heart. I encourage you to create a “giving plan” that aligns your intentions of ‘why’ you give with the optimal ‘how’ to do so.
Data from Charity Navigator notes that 12% of annual giving occurs in the last three days of the year – so tax benefits do matter. If you are a giver and want to do it with moxie and momentum, here are some strategies you want to look at in the last quarter of 2018.
Start with analyzing whether you will be better off taking the new standard deduction or with the changes that have been made to the schedule A – if you are still better off with itemizing your return.
Standard deductions have gone up – $12,000 for individuals and $24,000 for couples. If you are over 65, tack on an additional $1,300 each. Previously, about 30% of Americans itemized their returns, and it is estimated that fewer than 10% will do so in 2018.
For those that will benefit by itemizing, pack as much of your medical expenses into 2018 as possible. Do you have portfolio gains in a taxable account? Consider ‘stacking’, or ‘chunking’ your donations. There are two fantastic tools that can help you.
Donor Advised Fund
With the DAF, you take the deduction the year the contribution was made. If you itemize, the charitable cap has gone up as a percentage of AGI. Previously, it was capped at 50% of AGI with a carry forward. Now the cap has risen to 60% of AGI.
Once your contribution is in the DAF, you decide when and to whom you want the DAF to disburse your funds. It could be done all at once or over a period of years. This is one way for families to open up the discussion around giving.
Charitable Remainder Trust
If you need income, this is a creative way to leverage your giving, receive a tax deduction and maintain cash flow for a period of time or a lifetime. The tax benefits and income are based on many factors, so discuss this option with your professional advisors.
Do you think you’re best suited for the standard deduction and have reached age 70 1/2? You want to keep your AGI as low as possible in order to minimize the impact on your Medicare premiums, sur taxes and provisional income that impacts the taxation of your social security.
Qualified Charitable Deduction
Keep your Required Minimum Distribution off page 1 of your tax return. You ask your custodian to give your RMD directly to the qualified charitable organization of choice.
It needs to come out of a personal IRA and can’t go into a DAF. This way the distribution is not taxed as ordinary income – keeping your AGI lower and maximizing the impact of the standard deduction.
None of these options should be viewed in a vacuum and should be considered in tandem with your other financial vehicles and the opportunities and concerns around lifestyle, longevity, liquidity and legacy issues. These ideas should be discussed in depth with your professional advisors.
We have three quarters of the year behind us, summer is winding down and now is a great time to crunch some numbers and delve into the discussions that allow you to give generously and keep more in your pocket.
If you are within five years of retirement, I invite you to download your copy of my Monetary Manifesto today!
What do you think about giving funds to charities? Do you like to make such donations? Which charities do you support? Please share in the comments below.