2023 Tax-Smart Philanthropy

We recommend charitable giving as a tax strategy. Many people have required minimum distributions (RMDs) they need to pull out of their IRAs each year. You can still take the required distributions out, and if you don’t need those funds, you can gift them to a non-profit. For example, if you’re required to pull ten thousand dollars out of your IRA each year, but you already give ten thousand dollars out of your checking account,  you can stop doing that and start gifting it directly from the IRA. That money would not be counted as income so it’s a great way to reduce your overall tax liability.

Something else to consider is a donor-advised fund. With this fund, you can gift money from your RMD to your own fund. That then gets invested like a brokerage account and later, you can choose where you want to donate the money. It doesn’t have to be a requirement of distribution, and it could be any amount. Many of our clients who have sold businesses have put a percentage of that into a donor advised fund and they actually use it around the holidays. Their family members think about which non-profits they want to help during the holidays. Then, they take the dividends from all those contributions and make donations, creating tax-smart philanthropy.

Have more questions? Contact Us

Casey Smith
President, Wiser Wealth Management

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