Gifting with the Tax SuperSheet™
Are you a giving person? Charitable contributions can significantly lower your tax bill, and there are many different strategies available to take advantage of this tax benefit.
Donations of non-cash property or shares of stock, creating a Donor Advised Fund, or exercising a Qualified Charitable Distribution are all viable options for reducing taxes through gifts you are already planning on giving. By comparing the overall tax benefits of each of these strategies, the Tax SuperSheet illustrates which option is ideal for you.
FFP recently developed a charitable giving strategy for a retired client, with a substantial IRA, and several other income sources adequately funding their retirement. The client doesn’t require IRA distributions to fund their personal spending and were interested in donating a large sum to their favorite charity. After running the numbers through the Tax SuperSheet™, we found significant tax savings in making a one time $100,000 IRA distribution to a Donor Advised Fund in the current year. By adding the gift to the itemized deduction page of the tax return we anticipated current year tax savings of $6283. But the tax savings didn’t end there. The one time distribution lowered the required minimum distribution for all following years (because there is now less money in the IRA), and thus also lowers the tax bill for all following years. We project tax savings of $11,003 for the next five years and total tax savings of $45,256 over 20 years.
Simply put, the charity received $100,000 while the client will only end up paying $54,744 for the donation over their lifetime. If you are the giving type, the team at FFP Wealth Management (with the aid of the Tax SuperSheet™) is continuously developing strategies such as this to give you the most value for your charitable gifts.