How to Give ‘$mart’ from Your Heart

Tips for Charitable Giving and Lower Taxes

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As the 2017 tax reform has made extensive changes affecting your income tax returns in 2018, we wanted to take a moment to:

  1. explain how you can use a few of these changes to your advantage (we can help alleviate taxes…we love doing that!)
  2. provide some heartfelt, yet savvy, charitable “investment” advice.

First, let’s address how your charitable giving can effectively lower your taxes to offset other lost deductions for 2018. 

The doubling of the standard deduction, as well as the limitation of a combined $10,000 deduction limit for state and local income tax, sales tax, and property tax, were both significant changes to the tax code.  As a result, many people will no longer be able to itemize deductions, and will be using the higher standard deduction.

What does this mean for you?  Blake Allen of K·Coe Wealth explains, “Basically, if you use the standard deduction, you will no longer be able to receive an additional tax break for contributions you make to a qualified charity. However, if you are at least age 70 ½ and have an IRA that you do not need to use the required minimum distributions for living costs, there is a special section in the tax code that can provide some relief.”

A qualified charitable distribution (QCD) allows anyone aged 70½ or older on the date of the contribution to donate up to $100,000 annually to a public charity directly from their IRA without counting the amount as taxable income

(Since this $100,000 limit is per taxpayer, a married couple could each give $100,000 from their respective retirement accounts.)

Allen notes, “A critical component of this rule is that the distribution cannot be paid to the IRA owner, but instead it must be payable directly to the charity. The benefit though, is that there is no need to withhold income tax from the distribution since it will not be included in your taxable income. Make sure you work with your account custodians so the donation is processed correctly.”

Second, here are a few guidelines for making heartfelt, yet savvy, charitable investments.

Obviously, there are personal motives for making charitable contributions as well as tax motives.  Allen and the K·Coe Wealth team use these guidelines when helping clients sort through the sometimes overwhelming decisions surrounding charitable giving:

  1. Treat charitable contributions as you would an investment. Examine choices carefully, and ask lots of questions.
  2. Give where it counts. Research organizations’ endowment funds as sometimes finding smaller charities with bigger needs may increase the impact of your dollars.
  3. Volunteer where you donate. The greatest donor satisfaction is often found within the combination of time and money, as those who donate are generally more satisfied by seeing where/how their investment is helping.

Contact a K·Coe Wealth advisor today to learn more about how to reap the rewards of charitable giving – both personally and as a smart investment: K·Coe Wealth team.

Investment Advisory Services offered through KC Investment Advisors, LLC, d.b.a. KCoe Wealth. Insurance products offered through KC Insurance Agency, LLC. CA Insurance License # 0L15926. Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/SIPC, headquartered at 18 Corporate Woods Blvd., Albany, NY 12211. KC Insurance Agency, LLC and KCoe Wealth are not affiliated with Purshe Kaplan Sterling Investments. Not FDIC Insured – Not Bank Guaranteed – May Lose Value, Including Loss of Principal – Not Insured By Any State or Federal Agency.

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