Charitable Giving Archives | Peterson Wealth

Give While You Live: The Meaningful Impact of Gifting Today

Give While You Live: The Meaningful Impact of Gifting Today – (0:00)

Alek Johnson: Well, welcome everyone. I’m excited to be here with you today. We have another great and relevant topic to dive into today. And while I’m sure many of you have plenty of other things you could be doing here at lunchtime, you’re taking the time to jump in with me today, and for that, I’m very grateful.

So, for those who don’t know me, my name is Alek Johnson. I am a Certified Financial Planner™ and one of the lead advisors here at Peterson Wealth. As always, I just want to start off with a couple of quick housekeeping items.

First, just to set expectations, this should be another shorter presentation today. I think we’re targeting around 20 to 25 minutes.

If you haven’t noticed by now, I’m one of those guys who really thinks that less is more sometimes. So, I’ll try to keep it on the shorter end for you.

If you have any questions throughout the presentation, I have Jeff Sevy, who I was just chatting with, online with me today. Jeff’s another one of our great advisors. So, feel free to use the Q&A section. He will be answering any questions you have as best as he can.

At the end of the webinar, I am happy to take some time and go through a couple of more general questions that you may have. And then if you have more of those individualized questions, please feel free to reach out to either your advisor here at the firm if you’re a client. If not, feel free to email us, email myself, or you can always schedule a free consultation as well, and we’re happy to help out.

Last but not least, as always at the end of the webinar, we will send out that survey. If you wouldn’t mind just taking a couple of minutes to fill that out for us, it’s always extremely helpful so that we can get your feedback. And it’s just nice to see what you want to know about, where we’re at as far as presenting, and any other additional feedback you have.

As always, just a quick disclaimer before we dive in. Nothing in the webinar should be taken as personal investment, tax, or legal advice. It’s for general use only. If you want more of those individual recommendations, again, please reach out to your advisor here.

So today, as the title suggests, we are going to be talking about gifting. First and foremost, I just want to start off by saying this is not a push or a guilt trip or anything like that.

I am not here to convince anyone that they have to give their money away during their lifetime. In fact, in some cases, I have advised against it as an advisor.

However, this is a conversation that’s becoming more and more common as we continue to meet with more and more people. We have clients come in all the time and they ask us questions that sound something like this:

Should I give my kids, or my grandkids, or potentially my friends—should I give them money now, or do I wait and let them just inherit it when I pass away as part of the estate?

For decades, the default answer was pretty simple: just wait. Let the inheritance come later, and they’ll just receive it after you pass away. But there’s been a bit of a growing shift recently.

Many retirees are starting to ask those questions: if I could help now, I’d like to see the impact. What if the legacy isn’t just what I want to leave behind—but I want to live through it with my family?

So, it’s kind of a turning point. And I have actually seen this idea with my own family.

My grandparents were always very frugal, hardworking, modest, and extremely careful with their money. Like many of their generation, I think the original plan was just to leave everything behind after they were gone.

But a few years ago, everything changed. My grandpa had a stroke. Thankfully, he kept his life. He’s not fully recovered, but that experience was a little bit of a wake-up call. Life is fragile. Time is precious. So my grandma made a decision. Instead of waiting to give later, she chose to create a memory now.

Last year, she took our entire family—her kids, grandkids, even the great-grandkids (which I sometimes think maybe she regretted, but it’s beside the point)—on a cruise to Alaska.

And I can tell you, for us, it was not just a regular trip. It was a memory that is going to live with us forever. And for her, it was just a chance to give us something while she was still here—to laugh with us, share stories, and just enjoy that gift together.

Now again, I want to be really clear. I am not saying everyone needs to give during their lifetime. In some cases, it’s not even financially prudent to be doing that.

But the purpose of today’s discussion is to explore why some people do choose to give during life, how it can be done thoughtfully and strategically, and what the tax rules and other situations look like if you do decide it’s right for you.

The Case For Giving During Life – (5:32)

So, that being said, let’s discuss the case for giving during life. And I’ll just start off by asking you this question. You can kind of keep it in mind as we go throughout: If you could help your kids buy a home, pay off student loans, or take a meaningful trip as a family—and still feel confident in your retirement—wouldn’t you want to be around to see that happen?

Now, I don’t know if any of you have read it or not, but I’m going to share a few of the teachings today that are found in the book called Die With Zero by Bill Perkins. Now let me just say right now: I am not a devout believer in everything that Perkins says in the book. I have a few qualms with some of the principles that he talks about. The title itself—Dying With Zero—I think there should probably be more planning than that.

But one thing that I really appreciate is when he argues that the goal is to maximize life experiences, not net worth, by intentionally spending your money during the stages of life when it creates the most value.

So the value aspect is huge. One of the biggest concerns with delayed giving is that it may not provide the greatest value for either you or the person you’re hoping to help.

So think about it like this: your kids probably won’t need your money when they’re 65.

By that point, they’re likely already to be financially stable, probably paid off their mortgage, they’ve built their own nest egg—they’ve kind of got things figured out at that point.

But turn back the clock 30 years when they were juggling daycare, trying to buy their first home, starting a business, or dealing with student loans—that is when a gift could make a real difference.

Another reason people are rethinking delayed giving is that it means missing out on the joy of seeing your gift in action.

I’ve had so many clients share stories of helping a child or a grandchild. Almost without fail, those stories are told with a big smile, and at the end, they say something along the lines of, “It was one of the most rewarding things I have ever done.”

For them, it’s really not just about the money. It’s about the moment it creates and the experience they were able to share.

So again, while I don’t agree with everything, there are a few principles from that book that I wanted to share that I think can really reframe how we think about giving and spending in retirement.

First, time-bucket your life. The idea here is to be intentional. Intentionality when gifting is a really big thing.

So it’s about being intentional when you do things. Certain experiences—like traveling, those bigger adventures, sometimes even just more of that active time with family—that’s usually better in your sixties and seventies compared to your eighties or nineties.

So align your money with your energy, your health, and your relationships—and not put off everything for someday down the road.

Second, net fulfillment over net worth. This flips the usual mindset. Instead of aiming to die with a large account balance, you can ask, “Okay, what is this money doing for me and the people I love?”

The real goal, in my opinion, is not to just accumulate endlessly. It is to live meaningfully along the way.

And then finally, we already kind of talked a little bit about this one, but just give when it matters most. Whether it’s a gift of money or shared experiences—timing is everything. A gift in someone’s thirties can change their life. In their sixties or seventies, they may not need it. So waiting can mean missing the window where your gift has the biggest impact.

Gifting Strategies and Tax Considerations – (9:26)

So how do we help now but do it in the right way? I want to talk through a couple of different tactics because there are some important tax rules and strategies to keep in mind as you go.

But before we dive into some of those, I just want to kind of give a baseline, because it’s important to understand the basics of just the gift tax.

The gift and estate taxes are federal taxes designed to apply to you when wealth is being transferred from one person to another, either while you’re alive or after you pass away.

The gift tax specifically applies to transfers made during your lifetime. The estate tax applies after your death.

Today, I just want to focus on the gifts made during life, so that gift side. The estate is kind of a whole new ball game.

Now, the tax rate on gifts is progressive. It starts at 18% and can go as high as 40%. Depending on how much you give, it can be a steep price to pay if you have to pay that 40% tax.

Naturally, a couple of questions I just wanted to address from the get-go: One can think, “Well, do I have to pay that? Or since I’m the one gifting the money, can they do it?” In most cases, the person giving the gift is the one responsible for any tax owed—not the person receiving it. That’s not always the case, but that is kind of the rule of thumb.

Another question we often hear is: “Do I get a deduction for giving money to my kids or to my grandkids?” Unfortunately, again, the answer is no.

While charitable gifts—things like giving to churches, qualified nonprofits—that can still be deductible, of course. But gifts directly to family or friends are not tax-deductible.

So far, I know maybe what many of you are thinking, this is not a very compelling case. You’re telling me I have to be generous, pay taxes on my generosity, and I don’t even get a deduction for doing so.

I promise you though—it’s not all doom and gloom. There’s really good news, and that’s thanks to the annual and lifetime gift tax exclusions. Because of these two things, in reality, most people will never owe a penny in gift tax during their lifetime.

So let’s talk about why. I want to start off with the annual gift tax exclusion.

Each year, the IRS sets a limit on how much you can give to another person without it counting against your lifetime exemption or requiring any paperwork. It’s completely tax-free.

For 2025, that number is $19,000 per person per year. So, you can give $19,000 to as many people as you’d like—completely tax-free, no paperwork, no headache, anything like that.

It’s kind of a funny number, why $19,000? For the IRS, the general rule is that any gift is a taxable gift. However, the IRS would need a workforce the size of Manhattan to keep tabs on every little birthday card, every Christmas present, and so on and so forth. So, there’s just no way of really tracking that.

So, $19,000 is essentially the IRS’s way of saying: “We don’t want to worry about it—anything less than that.” This number also adjusts for inflation. So, in 2024, it was $18,000. Now this year, it’s $19,000.

If you’re married, you and your spouse can actually combine your gifts, meaning you could give a child or a grandchild $38,000 per year as a couple, completely tax-free.

One thing I’ll point out here, too: gifts don’t have to be in cash. You can gift stock, real estate, business interests, artwork, collectibles—really, basically anything of value, you can gift.

Now, I understand $19,000—for some could be plenty, for others it may not. So what if you do go over that $19,000 threshold?

Well, in addition to the annual gift exclusion, you also have what’s called a lifetime gift exclusion. If you give above that $19,000, it just means that anything above $19,000 goes toward your lifetime gift and estate tax exemption.

To give you just an idea, let’s say you gifted $30,000 to a child. $19,000 of that you don’t have to include, but then $11,000 of that would go toward your lifetime gift and estate tax exemption.

Now, what is that amount? Well, as of 2025, it is currently $13,990,000 per person. So for a couple, nearly $28 million. So unless you are giving away very large sums, you’re likely in the clear.

Now just as a quick side note, this exclusion is set to be cut in half at the end of the year, but part of the bill that Congress is currently reviewing and debating would extend these bigger exclusions.

So, when you hear that and you kind of see that—for basically $14 million there—you can kind of wonder: why in the world does that $19,000 even matter?

Well, if you give more than that to any one person in a single year—that $19,000—you are required to file IRS Form 709. So you kind of have to put it on your tax return.

Even though you don’t owe the tax, you still have to report it, so you get hit with the paperwork. So staying under the limit can help you keep things nice and clean and avoid the nuisance that comes with that.

But the other big reason that $19,000 matters is that the lifetime gift tax exemption and the estate tax exemption are tied together.

So I know I said I wouldn’t talk a ton about estate, but this is one of those important features here.

Any gifts you make during your lifetime that exceed that $19,000 will reduce the amount that you can pass on estate tax-free when you pass away.

So, in other words, they draw from the same bucket. If you give more now, your estate tax exclusion gets smaller later on.

To summarize these two:

You can give freely up to $19,000 per person per year—no questions asked.
If you go over that, you’re simply tapping into your lifetime exclusion, which again is currently about $14 million.
And if you gift over that $19,000—although you likely won’t have a tax unless it’s a significantly large sum—you will need to file a form that can start eating away at your estate exemptions down the road.

Now that we’ve discussed those exclusions, let’s talk about a few other strategies. One of the most powerful ways to support a child or grandchild is through the funding of a 529 plan.

As you probably know, a 529 plan is a tax-advantaged savings account specifically for education.

Money grows tax-free, and then as long as it’s used for qualified education expenses—tuition, books, sometimes even room and board—it can come out tax-free as well.

Now, contributing to a 529 is considered a gift for federal tax purposes. That contribution is subject to that $19,000 threshold we just talked about.

However, with 529 plans, there is one special caveat. If you want, you can actually supercharge the savings that you put in there. The IRS lets you make up to five years’ worth of gifts all at one time without triggering the gift tax.

That means you could essentially put in $95,000 for one person. Again, if you’re married, $190,000 into that 529. This is called five-year gift averaging. All it requires is you do have to file that Form 709, but there’s no gift tax due at all.

Why is that so powerful with a 529? Because the earlier those funds are invested, the longer they have to grow, especially if college is still years away. You can invest in the 529 using a lot of similar funds, like you can with your IRAs, your 401(k)s, and things like that.

So, whether you’re looking to give your grandchild a head start or help kids avoid student loans—whatever it may be—a 529 plan, especially when you front-load it like that, can be a really smart and generous move.

Another powerful but often overlooked strategy here is paying for education and medical expenses directly. The IRS allows you to make unlimited tax-free payments for someone else’s qualified tuition or medical care, as long as you pay that institution directly.

That means you could pay a grandchild’s tuition directly to the university. You can cover a friend or a family member’s surgery in a hospital. And in both cases, those don’t count toward your $19,000 annual exclusion. They’re completely exempt; they don’t even touch that.

What that means is that you could still give that same person, in the same year, up to that $19,000 of additional assets without triggering any type of gift tax or filing requirements.

So, if you’re looking to help someone in a meaningful way, this strategy also can be really helpful in the long run.

Now, there are plenty of other strategies that you can really dive into.

I think sometimes with higher net worth, you just get a little bit more tactical.

Best Practices For Intentionally Gifting – (20:00)

But I do want to still go through a lot of what we call our best practices. These best practices, over the years, as we’ve helped clients gift their kids and grandkids, there are a few helpful insights that we’ve come away with that I would like to share with you. So you can avoid the headache that sometimes comes with gifting, as good as it can be.

Number one, plain and simple, just start with a plan. When it comes to giving during your lifetime, again, intentionality really matters. So, before making any significant gifts, make sure they align with your overall financial plan and retirement income strategy. Giving is generous, but it should also be sustainable.

It’s also important for you to decide what you’re trying to accomplish with your giving. Are you providing a head start? Are you reducing student debt? Do you want to share those experiences in travel?

So just being very intentional is huge when it comes to this.

Number two, I can’t emphasize this enough—don’t jeopardize your own security.

There have been plenty of times when I’ve kind of had a little bit of angst in my heart when a client wants to gift, and I know that it could make them more vulnerable. So you want to be generous, but not vulnerable.

It’s easy to want to help kids and grandkids in the moment, but without a clear plan, it could disrupt your retirement income strategy, harm your cash flow, deplete emergency reserves, and really limit future flexibility for you to do the things you want.

I’ll tell you, this is especially true for widows. It’s common for widows and widowers to put the needs of their children ahead of their own. They’re compelled to gift money, especially at that kind of time.

While that generosity is very admirable, gifting too much or in the wrong way can cause a lot of unintended consequences. I always encourage that before we make a gift, we go ahead and stress test that gift.

Meaning you can ask questions like: “If I were to gift this now and then the markets were to drop, would I be okay?”

“If I were to gift this now and then healthcare costs spiked because I got sick, would I be okay?”

Again, just the principle be generous, not vulnerable.

Number three, be fair, but not necessarily equal. This is a big one. Not every child or grandchild always needs the same kind of help.

Tailoring your support to each of your children’s needs is often more impactful than just dividing it evenly. Now, that’s not to say you can’t. If that works for you and your family, perfect. But it doesn’t always have to be exactly equal.

Just be sure here to communicate clearly to avoid a lot of those potential misunderstandings down the road.

Number four, and this is a big one again—I can’t stress this one enough—avoid gifting around holidays or birthdays. It’s best to separate your thoughtfully planned financial gifts from emotionally charged moments.

Giving a large check on Christmas morning can unintentionally shift the tone or create unwanted expectations. So I always recommend just a more neutral setting, something more neutral time throughout the year.

I’ve had a few clients in the past who really wanted to give their children gifts on Christmas. And of course, the children were elated that year. They were thrilled when they received the money that was given to them.

However, the kids in that one year alone came to already hope for and expect that same cash next Christmas. So when my client didn’t really have any intentions of gifting, and then come Christmas morning, you wake up and there’s nothing there, things turned a little sour with a few of the kids.

So being random and sporadic can be a much better approach than trying to time it along those certain events.

The last one here, if you have any major concerns, loop in your advisor or your accountant to help you out. One, they’ll just make sure everything is structured properly, that you’re complying with the IRS, things like that.

But it helps again to shore things up, avoid any confusion, and avoid really jeopardizing your own security like I mentioned.

So I know that was a little bit quicker. Again, sometimes I think less is more—and hopefully you do too at times. But before I open it up to questions, hopefully all of you today have already received this book, Plan on Living. If you don’t have one, please request one. We’ll send it out to you for free.

It’s the book that our founder, Scott Peterson, wrote. It talks a lot about our investment philosophy, how to set up a retirement income plan, and a lot of those principles can be found in there.

We usually do get quite a few requests after each webinar, so if you don’t have one yet, please feel free to reach out. If you’d like to share one again with friends, I know that’s come up a couple times as we’ve been sharing this slide and a few webinars that I’ve given, feel free to just reach out to marketing@petersonwealth.

Include their name and address, or we can send it directly to you as well if you want to give it to them.

Question and Answer Session – (25:30)

Okay, perfect. Before I turn it to Jeff for any questions here—again, just thank you so much for jumping on. It really means a lot to us each month when you tune in and give us your feedback.

Kind of to give another quick plug for that survey right after—if you wouldn’t mind filling that out, giving us any content that you’d like to hear about or feedback for our presenters, that’d be great.

Okay, Jeff, I’ll turn it to you. Any questions that came up throughout?

Jeff Sevy: Awesome. Yeah, well, I just have one unanswered question here… oh, it looks like another one just popped up. Let’s see:

Q: Are there different tax implications when gifting cash versus gifting assets like stock or property?

Alek Johnson: A: Yeah, it’s a really good question. You can kind of play it however you want, but when it comes to gifting stock, just one thing to know is that your basis in that position will transfer over to the recipient.

So let’s say you bought Apple stock for $10,000 and it’s now worth $50,000. If you were to pass away, that person—if it was your child—would receive a step-up in basis, and their full basis becomes $50,000.

If you gift it, their basis becomes yours. So they get the basis of $10,000, and now if they were to sell it, they’re on the hook for the $40,000 of growth in that stock.

So that is one thing to be mindful of. Generally, you’ll see people giving stock that they don’t have significant growth in—just for that reason alone—so that if the recipient does sell it, there’s not a huge tax impact.

Jeff Sevy: Q: Are there any rules, like you must file jointly in order for my wife and I to give $38,000 to each of our children?

Alek Johnson: A: No, you can. I’m assuming you’re thinking like if you’re married filing separately—but no, you can still give. Every person is entitled to that $19,000. So, yeah, pretty straightforward. You don’t have to file in a certain way to be able to do it.

Jeff Sevy: Q: Does a loan without interest constitute gifting?

Alek Johnson: A: Yeah, so this is one of those ones I didn’t take a ton of time on because it can get into the weeds. But you can definitely discount it and sometimes forgive along the way when you do a family loan.

I’d recommend either talking to your advisor here or your accountant to see what those implications look like because some of that interest can be taxable to you. There’s just a little bit more nuance that goes into family loans.

Jeff Sevy: Q: Can the 529 plan be used by more than one student?

Alek Johnson: A: Yes—great question. Most of the time, the 529 plan will have a named beneficiary, but you can change that beneficiary at any time.

Now, there’s a little caveat with generations. Let’s say you set it up for your grandchildren—you can move it from one grandchild to another, and they can all benefit from that.

If you move it from one of your grandchildren up to a child who wants to go back to school, then there could be some tax consequences.

Again, I’d recommend reaching out directly to either your advisor or an accountant. But for the most part, yes—you can change the beneficiary at any time.

Jeff Sevy: Q: Key points to keep in mind when charitable gifting using your 401(k) to partially satisfy RMD requirements?

Alek Johnson: A: Good question. So with the RMD (Required Minimum Distributions), you also have what’s called Qualified Charitable Distributions (QCDs). When you make a QCD, that satisfies your RMD.

The caveat is the QCD can only go directly to a 501(c)(3) charity, so they have to be a qualified charity.

You can’t give that money to children or family directly and have it satisfy your RMD—that would just be taxable.

But if you do that donation directly to a church, the Red Cross, or any of those qualified charities, then that is completely tax-free and satisfies the RMD for you.

Jeff Sevy: Q: Can we gift in increments up to the $19K or $38K in a given year, or does it have to be in a lump sum?

Alek Johnson: A: You can absolutely do it in increments. The biggest thing is just over that one full year—if you go above $19,000, then you have to start reporting it.

But if you did $1,000 a month or anything like that, absolutely—you are completely free to do that.

Jeff Sevy: Okay, awesome. Well, that is all the questions that I have.

Alek Johnson: Perfect. Well, thank you very much. Those are great questions, honestly, so I appreciate you all asking them.

Thanks for your time. Again, please—if you don’t mind—fill out that survey for us, and we’ll talk again soon.

3 Strategies for Retirees to Save Taxes Through Charitable Giving

Mark Whitaker: Alright, well we’re just about ready to get started here. We’ve got a question for everybody as your joining the meeting here. We’d love to know where you’re joining from. So in the Zoom meeting, if you’re familiar with using the Zoom platform, there is a chat feature. We’d love to hear where you’re from and tuning in from. So if you want to put down your city, or state, or whatever it be. We’d like to see where everybody is joining from.

We got someone here from Provo. We’ve got a local, a local in the audience. Let’s see, we got South Jordan here and Payson. Utah is well represented.

Mark Whitaker: HK, we got one that came in HK, and does that ring a bell to you? Daniel, what is HK?

Daniel Ruske: Hong Kong? I don’t know.

Mark Whitaker: Oh maybe. Maybe I’m looking for a clarification from that one. We got Nevada, Hong Kong, you were right from Hong, Kong, very cool.

So it looks like we essentially have Utah, Nevada, and Hong Kong here. Here we got southern California. Okay, alright very fun. Well, welcome everyone. I think we’ll go ahead and get started for those of you who signed up for the webinar. You probably noticed there was a different face initially on the webinar invite. Carson Johnson, he was going to present today, but unfortunately, he woke up this morning and was feeling awful. And so he asked that we get someone to fill in. So Daniel, one of our senior lead financial advisors, will be joining me today to cover the part of the presentation that Carson won’t be able to cover today.

For those of you who are unfamiliar with Peterson Wealth Advisors, we specialize in providing retirement planning services – financial planning, investment management, and tax planning – for people who are about to retire, or who are already in retirement. As it might indicate from today’s topic, taxes used for retirees are a very important issue to get right. And so we’re excited to do this webinar.

A little bit about Daniel Ruske, he’s one of our lead financial advisors. He has both a Bachelors’s and a Master’s degree in personal financial planning. He’s also a Certified Financial Planner™ professional, and he’s been with the firm for a number of years. Before joining the firm he worked for another financial planning company here in Utah.

A couple of housekeeping items, for those of you who’ve been on our webinars in the past, this will be very familiar. But we have a couple of things to note. Today’s presentation will be about 20 minutes. We want to cover these topics fairly quickly. So we’re not going to go into a lot of detail, but we like to hit the high-level topics and allow for more time at the end for questions and answers. As you’re listening to the presentation today, as you listen to the webinar, Alek Johnson another one of our financial advisors, he’s also a Certified Financial Planner, he will be monitoring the chat line and the Q&A box.

While we’re going through the presentation, if there’s a question that comes up, you don’t have to wait till the end to type it in. Go ahead and type it in and he’ll be able to answer some of those questions during the presentation. And at the end of the webinar, I think we’ll choose a few of them that will be helpful that would be good to cover for everybody attending today. So please use that feature.

Inevitably, as we talk about taxes, as we talk about these topics there are always going to be things that we can’t cover in detail. So if there’s something that wasn’t addressed clearly, or you’d like to follow up with us to get some questions answered, you can reach out to our firm afterwards, and I think Alek, he’s going to go ahead and put in a link within the chat box. So if you’d like to just schedule a time to meet with one of our Certified Financial Planners to ask some specific questions or to go over something in more detail, please take advantage of that. Or if later on, if you just have a question and you just would like a one-off, you’re not necessarily interested in having a dialogue, but maybe just have a single question, please feel free to reach out to our firm through phone or email and we’d be happy to help you out.

A couple of other housekeeping items. Let’s see, at the end of today’s presentation, we’re also going to have a survey. We appreciate your feedback and every time that you answer those we always look at them. And hopefully, we can make these presentations better and more helpful for everybody.

With that all being said, Daniel, do you think I missed anything that maybe we need to cover for housekeeping items?

Daniel Ruske: Alek covered the question that came through the chat. The recording will be sent out to everybody who’s registered. So if you’re not able to attend the whole time or if you want to go back and watch another part again, you’re able to do that. We normally get that email out the following day.

Mark Whitaker: Oh wonderful, thank you Daniel. That’s perfect. So let’s go over to our outline for today’s presentation. We’re going to go over a quick tax refresher before you jump in, and we learn about strategies and talk about how to apply them for retirees.

A brief review of some core principles of the tax code I think are important. So we’ll do that and then we’re going to get right into the strategy that we talked about. Different ways of doing charitable giving to maximize tax benefits for retirees.

So we’ll talk about bunching. We’re gonna talk about donating appreciated assets. We’re also going to talk about using a Donor Advised Fund and making Qualified Charitable Distributions. Like I said, at the end we’ll make time to have a Question and Answer portion.

So with that all being said, let’s jump into, let’s call it Tax 101.

Tax 101 (5:50)

Now I’ve used the analogy, maybe a bit well-worn, but I think it serves its purpose. When you play a board game, and I’ll use the example of monopoly. You have specific rules. And if you want to win, you want to do well in the game, you got to understand what those rules are. And if you don’t understand the rules then you know you’re going to have trouble developing a strategy to have the most advantage.

And as far as taxes go, it’s the same thing. There are rules, and the rules for taxes change from year to year. And so it’s important to work with somebody who can help you understand what those rules are. But there are some general concepts with taxes that basically stay the same from year to year. So that’s what we’ll cover today.

So, with taxes, the individual income tax formula is the basic kind of order of operations for calculating how much taxes somebody has to pay. So for everyone, we start with income.

There’s a lot of different types of income and each one of those different types of income might be taxed at different rates, or there might be a different percentage applied to those kinds or to the different sources of income. Well, when you have income come in, you’re able to exclude some of that income from taxes. So, you don’t even have to count it as income. Those are called above-the-line deductions, or exclusions. These are things that you’re probably familiar with like making a contribution to a Health Saving Account or making a contribution to your 401k or IRA account.

When you make those contributions, you’re making them from income. And that kind of contribution excludes that dollar amount from income. That’s how we arrive at something called your AGI, or Adjusted Gross Income, and this is an important number.

The Significance of AGI

This line right here, your AGI, you’ve probably heard about that because this is the line in the tax code that many of the tax credits and different rates are applicable to. So how much you pay for your Medicare Part B premium in retirement is based off what your AGI is. Whether or not you qualify for certain retirement tax credits in your state or at the federal level is contingent on your Adjusted Gross Income. So this is a very important number, and anything that we can do to manage this number for taxes is very important.

Well, from there, everybody gets to take some additional deductions. You’ve likely heard of something called the standard deduction and something called itemized deductions. A standard deduction is a particular number based on your filing status, whether you’re filing as an individual, or whether you’re filing as a couple married filing jointly.

For example, those are the two most common filing statuses. This is a deduction that you’re able to take. In addition to that you can also, or I should say, kind of alongside that, there are certain things that qualify for tax deductions. And if you add up all of those other deductions and it’s greater than your standard deduction, then you get to deduct the itemized deductions. But if it’s not, you just take the standard.

So fairly familiar ideas. Once you’ve taken off your standard or itemized deduction, that’s how you get to your taxable income there. That’s where you calculate based on your rates, you’re able to deduct credits. And that’s how you know how much of a refund or how much taxes you have too.

Okay, everyone is entitled to tax deductions. And as a quick refresher, these numbers here, these are the numbers for, I’ll pull up my little laser pointer, for the different filing statuses for single and married filing jointly. Now one thing for retirees after you’ve reached age 65, if you’re taking the standard deduction, you get to add an extra deduction to your standard deduction. So, if you’re married, each person gets to add $1,400 to the standard deduction. That’s $1,400 per person. Or if you’re a single filer, you get to add $1,750 and additional deductions.

Okay, a quick refresher. Because of tax law changes that happened back in 2018, most people who file their taxes are just going to take a standard deduction and that’s remained the case for the last several years. So, the question is, with the new tax law, I should say the tax law that was implemented then, how can retirees still get a tax benefit from making charitable contributions?

So that’s what we’ll get in now. So, Daniel do you want to cover today, do you want to cover our first strategy?

Tax Strategy #1: Maximize your Deductions by “Bunching” (10:41)

Daniel Ruske: Yeah, absolutely. So, the first strategy is bunching. Now, as Mark mentioned with the change to the increase in the standard deduction, a lot of taxpayers really take the standard. And what this means is they don’t really get tax benefit for the charitable donations that they make.

What is Bunching?

And so, the first strategy we’re going to talk about today is bunching. Now, what bunching is, it’s basically lumping multiple years of donations into the same year for the purpose of trying to get above that standard deduction and get a charitable tax credit for your donations. Now, I want to introduce to you the most famous bunch family I know, and this is the Brady Bunch.

Now, as we go through the Brady’s tax situation, theirs might seem pretty similar to some of you. So, Mike and Carol, they kept a detailed record. And this is what they’ve had for their itemized deductions for the year. And keep in mind that these deductions, the goal is to get it higher than the standard so that we can take the higher of the two.

Bunching Tax Example

So, for these two, they have the property and state income tax of $6,000. They have mortgage interest of $4,000, and then they have their charitable donations that they’ve made in 2022 of $12,000. If we add up all those itemized deductions together, it’s $22,000. And we cross that to the standard deduction and we’re obviously going to take what’s higher. It would be better for them to take the standard deduction.

Now, as you can see in this scenario, let’s go back just for a quick second Mark, the $12,000 that they donated, they could have 0 on that line and their taxes would be the exact same. So, they’re getting no credit for that $12,000 donation.

Now the next scenario that we’re going to talk about is the same, everything is exactly the same. Except for this time, they donate 2022 and 2023’s charity in the same year. The same property in state income tax is $6,000. The same mortgage interest is $4,000. But this time you can see on the line there, 2022 and 2023 donations are paid to total $24,000. In this case, we add up the itemized deductions, a total of $34,000. We cross that to the standard deduction. The Brady family this year, they’re going to take the itemized deduction, which is higher.

Now the plan when you do a bunch like this, a 2-year bunching strategy would be every other year in 2022. You itemized by donating 2-years’ worth of charity. The next year you’ve already paid the charity at the prior year, so you’ll take the standard and as a result, this gives you an average deduction of $29,400. In this scenario, obviously, your numbers will be a little different. But in this scenario, it results in a yearly savings of $828 each year.

Now, let’s cross that to 3-year bunching. So, in this scenario, the plan would be to donate 2022, 23, and 24’s charity all in the same year. You know we have the same property and state income tax, the same mortgage interest. But this time, the charitable donations are $36,000, 3 years’ worth of donations. As we add all those itemized deductions together, we get $46,000. It’s obviously much greater than the standard deduction.

The Brady’s will take the $46,000 as the deduction for their 2022 income on their income tax return, and then you can see in this plan you would donate 3 years, get the deduction. Then the next 2 years you would take the standard, and then in that, in that fourth year, you would determine if it makes sense to bunch again. And by doing a 3-year, bunching strategy you can see that Mike and Carol are saving approximately $1,272 each year.

More on Bunching Tax

Now a few things to highlight about bunching is, you know, you have to have the money to pay upfront right? And you have to kind of give this lump sum, you know, either 2- or 3-years’ worth of donations in the same year. And so, keep that in mind when applying the strategy. And then the other thing to consider is maybe you have this money, you’re ready to donate, and you know you’re going to donate it, but maybe you don’t really want the charity to get it all at once. Or maybe you don’t know you know, for sure, what your charitable desires will be in the future. Are you able to get a donation this year, and then divvy it out later on?

And the answer is yes. And so the answer to do this would be a Donor Advised fund. Now a Donor Advised Fund, is abbreviated DAF or DAF. So if we say DAF, we’re referring to this Donor Advised fund. And really, I think it should be called a Donor Advised account. I think it just makes it easier to understand because this fund is actually an account that an individual can, or a joint couple or family can establish. Really it’s an account, a personal charity account for you.

And as you can see on the screen if you follow the arrows, the advantage is you can donate cash, or appreciated stock donations and kind to this account. Now you get the tax deduction the year you donate it to this account. However, this account is something that you and your family can manage and really divvy out to the end charity in any amount that you want and really at any rate that you want.

So this account works really well if you’re bunching and you want to, you know, maybe you have a grandson, or daughter going on a mission next year. And you want to help with their mission, but you want the donation this year.

DAF

Well, you could donate to a Donor Advised Fund, have it sit in this DAF account until the need arises for a charity. And then from the DAF, you transfer to the end charity. And I will note that if you donate to a DAF, all of the funds in that account, or that Donor Advised Fund must go to a charity. There’s no way to get it back. So as long as it goes to a qualified charity, this can be for you know, really any of the donations, to the Church, it can be to any qualified charity that you could think of that you might donate to.

Very good. And then, the last thing I want to, well I’ll go through these points really quick and just read them. The reason why a DAF might work for you is with a DAF bunching of donations it becomes much easier to do and charitable giving becomes much more flexible.

A DAF also helps the donor to get tax deduction when it’s needed the most. And I want to talk a little bit more on this point here. You know, a DAF is common, we use it with our clients. Let’s say they sell a property, or they sell a business, or they get some type of payout the year that they retire. The advantage to do a bunching strategy or utilizing a DAF in a year when you have higher income is it makes the tax benefit even greater. So let’s run through a scenario real quick.

Husband and wife, they sell a property. They have much higher income than they normally do because of the sale of this property. They also have some extra cash that they could donate so they take the proceeds from the cell of this property. They donate 2- or 3 years’ worth of donations into a Donor Advised Fund. They get the deduction the year that they have the high income. And then they have this account that they can use for charity, really for the remainder of their lives. And I’ll add one more thing here, is, let’s say you have funds remaining in a DAF when you pass away. You can designate an end charity as the beneficiary of that account. Or you can name one of your family members to continue to manage that account on your behalf even after you passed away.

So, if you’ve donated to a DAF, and you haven’t used all of those funds, you could name your son or daughter and they can continue to use that for charity purposes as the family sees fit. So, it really is a great tool and that goes to point number 3, it creates a charitable fund for future generations there.

Tax Strategy #2: Donating Appreciated Assets to Charity (19:26)

Very good. Strategy number 2, Donating Appreciated Assets to charity. Now, this idea has been used in the past. We’ve heard of donating eggs and milk and wheat to charities. And rather than donating just cash or money right? And the item, that I’m going to bring up today is donating apples. And you may not donate an apple from a tree, but you donate apple stock. So the donating of appreciated assets. What this is, is let’s say, you bought apple stock and the stock has grown inside of this. And the shares they are embedded gains that if you sold to cash, you would have to realize the long-term capital gain that you’ve had on this apple stock.

Donate Directly to Charity

Now, what if you donate it directly to a charity? Well, what happens is you don’t have to realize that capital gain, and the charity also doesn’t have to realize that capital gain. And so, I have here on the screen on the left-hand side, we have a situation where we have appreciated apple stock. On the left-hand side, we have the $25,000. We sell it to cash and then we donate the cash. What happens in this scenario is, we have to pay $5,000 worth of State and Federal tax to give us a net of $20,000, which we then can donate to our charity.

Now, on the right-hand side, what if we just donated the apple stock directly to our charity? Well, you can see instead of paying $5,000 to State Federal tax, you pay nothing. And I’ll note that the charity also doesn’t have to pay this. What happens here is the charity gets an additional $5,000 and the donor doesn’t have to pay the tax on the gain. The donor also gets to deduct the full $25,000, versus just the $20,000 net after taxes. And then the last thing here is you can use the cash, say the $5,000 savings to reinvest, in you know, let’s say apple stock again, or another stock. And a few years down the road after it’s grown and has this appreciated value to it, you can then do the same strategy again. You could donate the appreciated stock.

So we have clients that you know, they donate let’s say $10,000 per year. And rather than donating cash, they donate $10,000 worth of stock. And then with that $10,000 that they’re taking from their wages, or from you know their Social Security or so forth. They then just reinvest that cash back into stocks. And then we kind of have this always maturing or always ready to donate appreciated stocks, and it works out to be a great strategy there. The last thing I’ll mention.

Mark Whitaker: Daniel, I was going to, Dan sorry to interject I was going to ask you. So, what we’ve talked about donating stocks that have gone up in value. Are there other or what are some of the other types of investments or in-kind donations that a person could make?

Daniel Ruske: Yeah, so perfect question. So, there are ways you can donate, say a part of a business. There are ways you can donate part of a property too.

So, let’s say you have an appreciated business, that the basis in it that it’s growing a lot larger. There are ways to donate this to avoid the capital gain on selling this. You know in this case, it’s not a stock but a property or business to then defer, or not defer, but don’t donate that, those gains and save those taxes. And then Mark maybe you have more you want to add to that question.

Mark Whitaker: Yeah, I was, I would maybe just to put a bow on it. I think you put it really well Daniel. Maybe the one last little thing that I’ll add is to say that when you donate appreciated investments that have gone up in value. A good way I like to think about it is you’re getting to double dip with your tax benefit.

Like Daniel said you’re able to, number one, you don’t have to pay the capital gains tax on the growth that you had in the investment. So now all of a sudden, you’ve avoided a certain amount of additional income. So that’s the first tax benefit. And the second is you now have the ability to donate a larger dollar amount potentially and increase, you know, the ads to your itemized deduction. So, this is a great strategy that’s known. But it’s also overlooked enough that we wanted to make sure it was included for today’s presentation, a very powerful tool for really for anybody, but especially for retirees.

Daniel Ruske: Excellent, I’d just add one more thing, Mark. A lot of charities have a donation and kind department. So, if you have questions about a particular charity, and if you can donate stock, or appreciated asset of any kind, you know we’re happy to do some research for you and contact that department. But a lot of those have it. And I saw a question pop up.

Can you donate stock to a DAF or does it have to go directly to the charity? Yes, you can donate appreciated assets to a Donor Advised Fund. So that could work.

Mark Whitaker: So, you know into your last point Daniel. I’ll just say this last one thing before we move on. To your last point, about not knowing whether the charity that you want to donate to, whether or not they have the ability, you know the team to be able to accept appreciated investments, you know except stocks and that sort of thing. And this is one of the other benefits of using a Donor Advised Fund, is that you know using a Donor Advised Fund, we like to use the one that’s done through Fidelity, Fidelity Charitable. But there’s a lot of other ones that are excellent.

These larger financial institutions have the legal and accounting teams and just the infrastructure to allow you to make donations of appreciated assets. And then from there you know, you can send a check to you know the food pantry or you know, what other maybe local charity that doesn’t have, maybe doesn’t have the bandwidth because they’re a smaller organization. You can just send them cash and make it so it can facilitate donating to the people that you want to.

Tax Strategy #3: Qualified Charitable Distribution (26:04)

Okay, so the last strategy that I’m going to, that we’ll talk about today is something called a Qualified Charitable Distribution, a QCD.

And up to this point, all of the strategies that we’ve discussed have related to trying to maximize your itemized deduction. So instead of taking the standard deduction, what if we donated multiple years of donations to be able to bunch and get a higher itemized in a particular year. And then on average, you know, we’ll have higher deductions. Or what if we donate shares of stock you know this way, we’re able to increase that itemized deduction. All of those deductions, or all of those donations, are coming from non-retirement accounts. And when I say non-retirement, what I’m referring to is you know, like a brokerage account, or a bank account.

Now, with this third strategy, Qualified Charitable Distributions. This is a little bit, different. This is a charitable giving strategy that is only available through a particular type of retirement account, an IRA. Nothing fancy, many of you have heard of it. It’s like a 401k account. Not through a company, just on your own. And this giving strategy is also only available to folks, who are over age 70 and a half. Now when you make a donation from a retirement account it also creates a deduction on a different part of the tax code. A deduction here actually reduces your AGI, your adjusted gross income. So it can have some additional tax benefits that the other strategies we discussed can’t do. So that’s what we’ll get into.

How does it work, and what is it? So like I said, a Qualified Charitable Distribution is a donation made from a retirement account, from an IRA. And when you do this, you’re taking money directly out of your IRA and setting it to a qualified public charity.

Now the benefit to doing that is you don’t have to recognize that the money you’re taking out, you don’t have to recognize that this is income. And for those of you who are getting closer to 70 and a half, or are already there, or may have just heard of this, once you reach age 72 in the United States, you actually are forced to take out a percentage of your retirement account each year. Whether you want to or not. Whether you need the income or not.

And so now all of a sudden, you’re going to be forced at 70 to take money out. This is a method of getting money out of your retirement account without having to pay taxes. So what are some of the benefits of doing a Qualified Charitable Distribution?

Well first of all, because you’re taking out, you’re taking it out tax-free, you don’t have to pay taxes on that distribution which you normally would have to. The other benefit is that because you’re reducing, because of the tax code, the amount of taxes you pay on Social Security could potentially be lower by making a donation this way versus other ways.

And a couple of, and then I guess maybe just to reiterate a point that we’ve already made, is that because of the higher standard deduction like Daniel illustrated, many people who pay to share, who make donations to charities don’t receive although it’s important to them. They don’t actually receive a tax benefit because their total itemized productions are rarely, you know, rarely exceeding their standard deduction.

How QCD Works

So let’s talk about maybe how, let’s look at kind of a, let’s get an example of how this works. So I have a retiree. Her name is Lori, and Lori is interested in doing a Qualified Charitable Distribution, a QCD. So we can see here on the left-hand side, these are her sources of income. She has Social Security, she has a pension, and every single year, at 72 now, she has to take out $10,500 from her IRA account. Now you can see that below that, we have her itemized deductions.

She could either do an itemized or standard. Well, she has her State and local taxes. And then she is going to plan on making about $7,000 worth of charitable contributions. So actually looking at her itemized deduction, $15,000, it is higher than the standard deduction. So she says, great I’m going to itemize. And with that, she has a total tax bill of $5,471. Now FYI, we have people tuning in from not just the United States, but other countries as well as every state. The numbers I’m using for this are for U.S. federal income tax and income tax for the State of Utah. I say that because every state has a different way. Some have an income tax, some don’t. They’re all different so just a little disclaimer here.

Okay, so with this she says well what if instead of doing an itemized deduction for the $7,000, what if I did a QCD? Well, let’s look at what that would do. First of all, we have the same income sources, pension, Social Security. I’d like to highlight one thing here on this page. You can see here that next to Social Security. In the first example, of the $35,000 she received, $16,400 was taxable. Well now, in the second scenario, only $10,450 from Social Security is taxable. Now, why is that? It’s the same Social Security.

The reason is because now that she doesn’t have to claim this $10,500, that full amount is income because she’s going to take out 7,000 and send that directly to a charity. It has an additional tax benefit in that she doesn’t have to claim as much of her Social Security as taxable income. That was a lot, maybe a little too wordy, the way that I put that. But the bottom line is that by doing a donation this way, you can potentially save additional taxes by lowering the amount of your Social Security benefit that is even subject to taxes.

So, let’s look at the numbers. Well, for itemized, she just has her state and local taxes. No charitable because she took it here. She can’t double-claim it. And so now she’s going to take her standard deduction. And you can see here that are total state and federal tax income taxes for the year are $3,108. So the bottom line is, she’s going to save almost $2,400 in taxes. Not by donating extra, but just by changing the method, the way she donates.

QCD Example

Okay, next example. We’ve got Jim and Lisa, and we have their income sources here. Pension, Social Security, and they’ve saved up a lot of retirement savings. So their required distribution is $60,000 for the year. Okay, we look at their state and local taxes and they’re going to donate about $25,000 to charity this year. Well, they’re going to take the itemized deduction. Often we have people ask us, “Well I already itemized because of how much I donate so this isn’t relevant for me.” Well, it may. Sometimes it’s not, but often it is.

So you can see that they’re going to take the itemized deduction and they have a total tax bill of just over $18,000 between state and federal. So, let’s look at what would happen if they did a QCD instead.

Well, here you can see that they’re taking out instead of $60,000, $25,000 of that is going to go directly to their charities. Instead of taking an itemized deduction, we’ll take a standard deduction. And you can see their total tax bill here is about $13,460. So again, even for somebody who was itemized, by changing the method by which they donate, they’re saving over $5,200 in taxes. By donating extra, doing anything special, except for this one thing, which is changing the method of donation. Doing a QCD versus itemizing it.

What to Know about QCDs

Okay, a couple of things to know with QCDs. It’s almost always beneficial to do it, not always, but almost always. And really to answer this question, we just need to run two scenarios, look at it both ways, and see if it makes sense. And to answer the question, yes, it does satisfy your required distribution. I was going to go into detail here about how to report a QCD. This is really the realm of your CPA, and this is something that’s a lot more well-known now. So I won’t do any details here, but obviously, you can ask more about that later.

You have to be 70 and a half to do a QCD. It has to come out of an IRA and you can’t do it from a 401k. Unfortunately, that’s part of the rule. So you have to do a rollover from your 401k to an IRA. And then from there, you can do QCDs. The donation has to go directly to a charity, and if you were curious, there is an upper limit where you can’t donate more than a $100,000 in a particular year.

So we’ve got some lessons I guess to pull from this. Getting to know your numbers. We need to base our decisions on real information. It’s hard to do planning unless you know the rules right? And taxes matter. By implementing these strategies, this is a way that you can have more money for your standard of living. Inflation is relevant, so the more that you can keep for yourself, rather than paying in taxes, is going to help with that. And you’re going to be able to support causes more efficiently that are important to you.

So with that being said, I think we’ve covered everything that we want to. We’ll go into our question-and-answer section now. And so, if you have a question, go ahead and put it into the Q&A box, and Alek I’ll turn the time over to you. Any questions that have come in that maybe we can get started with?

Tax Question and Answer (35:49)

Alek Johnson: Yeah, perfect. We’ve actually had a lot of really great questions. So, the first one here is just, I’ve kind of partially answered, but if you do want to speak more to it.

If you own a home. Isn’t it always better to itemize deductions?

Mark Whitaker: Yeah, great question. Daniel, do you want to jump on that?

Daniel Ruske: Yeah, great question. So, if you own a home, is it always better to itemize? My initial thought would be no. Now there’s an advantage to having mortgage interest because that goes to your itemized deductions. And then maybe helps get you closer to getting your charitable donations to help you on your tax credit. But I wouldn’t always say no. I would say you really have to take it case by case. Mortgage interest can help you on your taxes, but then you are paying interest to the bank. And so really, we’d have to dive into the situation to determine what’s the tax savings versus what interest you’re paying to the bank to figure out, okay does it make sense to itemize, or to just look into something else.

You have anything more to add there Mark?

Mark Whitaker: I know, I think that’s great. I was going to say just by way of example with many of our clients. I would say that most of our clients, they’re retired, or they’re about to retire, and they have their homes paid off. And those that don’t have their homes paid off have fixed-rate mortgages with very small mortgages. And so that being the case, most of our clients are taking standard deductions most years, even though they own homes. And that’s not because you know some philosophical, bent towards yes we have to take a standard deduction.

Like Daniel said, we just have to look at the numbers and what actually makes sense on a case-by-case basis. So yeah, just because you own a home doesn’t necessarily mean as a retiree that you will itemize. So a great question.

And given the time here, Alek, maybe we can do maybe one or two more good questions. And then I’ll say if with the questions that have come in, if you didn’t get your question answered, or you have other questions like I said you can reach out to our company directly and we’ll be happy to answer more questions for you. But any others there Alek?

Alek Johnson: Yeah, perfect. So one more that might be worthwhile for the general public here.

When donating appreciated assets to receive the tax deduction, do your deductions have to exceed the standard deduction to make it beneficial?

I kind of partially answered that there’s kind of two portions here of the tax benefits between the appreciated assets themselves, and then getting above that standard deduction if you want to talk about that.

Mark Whitaker: Oh, I love that Alek. Yeah, you really hit the nail on the head. So to answer the question, when you’re donating appreciated assets, does it have to be greater than the standard deduction to even make it work?

Like Alek said, there’s two 2 components that you might remember I said. Appreciated assets is like double dipping. So the first benefit is that by donating the appreciated asset, let’s say you were going to donate $10,000 to charity anyway. So you could do it with appreciation stock or with cash. Well, the benefit of just doing the stock is that in order to, you know by donating that, you no longer have to recognize the capital gains tax embedded in that stock. So you’re getting a tax benefit right off the bat by donating this stock instead of using cash.

So that’s the first thing, and that is a relevant tax benefit whether or not you itemize. Now to the second part of the question, does it have to be greater than the standard deduction to be valuable? Well, the larger it is the better it is. However, it’s possible that let’s say you have higher medical expenses, or you have some mortgage interest, or you have your state and local income tax. If you add up all of those maybe all of that together is $20,000. Well, then to exceed the standard deduction, maybe you only need 5 or $6,000, or 7, 8 right? And so it really depends on your other itemized deductions. So anyway, I hope that’s helpful, gives a little insight into how to think about that.

Daniel Ruske: I, love it Mark. Yeah, you described it very well.

Mark Whitaker: Maybe one more question Alek, and then we’ll let everybody get back to work.

Alek Johnson: Perfect, so one last question here then. So the last question, if I already am itemizing, does it still make sense to do a QCD from the IRA?

Mark Whitaker: Yeah, excellent question. Daniel, any thoughts on that? We covered this in the presentation, but maybe any additional thoughts?

Daniel Ruske: Yeah, so the answer is, we’d have to look at the numbers. And Mark did when he talked about the QCD. He mentioned that in almost every case, the QCD is the better option. But we’d have to look at the numbers. And this is one of those cases where it’s close.

I’ve ran it for clients before that itemized no matter, and really, it turns out to be in my experience, either the same or better to do a QCD. Now, a lot of times it’s the same or better because of the state tax. So depending on what state you’re from we’d have to determine, okay, are you getting savings on the state side even though the federal might be exactly the same. And so it doesn’t make sense. The answer is it could, and I think it’s definitely worth looking at.

Mark Whitaker: Yeah Daniel, I’ll just add one extra thing that we didn’t cover that Daniel didn’t mention, or what, like you said, we have to just look at it. And usually, it’s the state taxes that can like tip the scales one way or another.

One other thing, since we’re talking about retirees is that when you’re retired, you’re taking Social Security. You pay a Medicare Part B premium and believe it or not, the amount that you pay for that Medicare Part B premium is actually based off of your adjusted gross income. I’m sitting here kind of pausing because there are some little nuances. It’s not exactly your AGI, but it’s close to your AGI. So one of the potential benefits of doing a QCD versus itemizing, even if it would be the same either way, is that it’s possible that by doing a QCD, it lowers your AGI and thus allows you to pay a lower premium on your Medicare Part B premium. You know a lower cost for your Medicare Part B.

So, for example, for 2022, the Medicare Part B premium is $170.10 for the lowest income bracket. But it could go as high as $578 per person for Medicare Part B. So anyway, that’s another reason why doing a QCD may be more beneficial than doing an itemized deduction. Because it could reduce how much you pay for Medicare Part B.

So as you might be able to tell, all of these things are interrelated. And maybe you never thought that your health insurance would be related to your taxes, to your charity, to your retirement. But actually, all of these things impact each other. So it’s important, just like before you crack open a new board game, it’s important to read the rules before you put together a good strategy. Before you even can put together a strategy with your retirement income plan, taxes, health care considerations, your income, and your investments. It all ties together. So, it’s important to know the rules and see how you can find advantages and savings by looking at all of these things together as opposed to just one at a time.

I think that’s all we have for today. Again, thank you everyone. There will be a recording that you can pass on or watch this again, and hope everyone has a great day. Merry Christmas, and hope to see you again soon.