As we approach the close of another year, we can enjoy the returns earned in the stock, bond, and real estate investment portfolio in a variety of ways. And, while having more wealth accumulated now than ever before is comforting, it is equally, if not more rewarding to use your increased economic power to help others. The holiday season is a perfect opportunity to reflect and give to others, and believe it or not, the reward one experiences in helping others is more gratifying than to be receiving.
Studies, including one from the journal Science, prove that “people’s sense of happiness is greater when they spend more on others than on themselves.” While the emotional satisfaction we receive from donating our time or money is of value, the financial benefit is also worth noting. As the year comes to an end, it’s an appropriate time for tax planning in order to minimize income tax obligations and to maximize tax-deductible charitable contributions that you may be considering.
The current administration’s recent Tax Cuts and Jobs Act may have an impact on your tax return this coming April 15th. If you are accustomed to itemizing your deductions, you may well continue to this year, but the increase in the standard deduction for a family filing jointly to $24,000 will reduce the number of households that benefit from itemizing their returns compared to previous years. The shift from itemized to standard deductions is important because your charitable deductions reduce your taxable income when itemizing your tax return. For example, if you have less than $24,000 in itemized deductions including state and local property taxes (now capped at $10,000), mortgage interest expense, and all other categories, then you may consider “bunching” your charitable giving so that two or three years of planned gifts are donated in one year to secure the benefit of itemizing your return.
Another benefit to be mindful of when gifting to your favorite charities this holiday season is if you are age 70.5 or older, you can take your annual Required Minimum Distribution (RMD) from your IRA and elect a Qualified Charitable Distribution (QCD). A Qualified Charitable Distribution is an otherwise taxable distribution from an IRA whereby you have the distribution paid directly from your IRA to a qualified charity. If you’re planning to make a gift anyway, a QCD can be beneficial for increasing your gifting power because you would not incur federal and state income taxes like you otherwise would.
While the holidays can be a busy time of the year, if you’re thinking about giving, it may be worthwhile to find time to visit with your CPA or financial professional and see how you might be able to “show by the kind of hard work you’ve endured that we must help the weak, remembering that it is more blessed to give than to receive” (Acts 20:35).
Neither Wedbush Securities Inc. nor Financial Advisors provide tax or legal advice. Please consult your tax or legal professional to discuss your particular situation.
Jeff Runyan is the lead of Runyan Capital Advisors financial advisory team based in Beverly Hills, providing clients nationwide with wealth management and retirement planning advice. Backed by over two decades of industry experience, Jeff leads an investment team committed to designing investment portfolios that adhere to the premise, “Discipline Makes the Difference.”
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