Sometimes, life delivers a sweet deal where everyone wins. Monica McCarthy of Seascape Capital Management LLC shares a few ways to do some good and shrink the IRS check you'll write next year.
Donor Advised Fund (DAF)
With a DAF, donate now for immediate tax benefits but decide later which charities to support. Sweeten this deal by funding with appreciated stocks to avoid paying capital gains taxes.
In a high-income earning year, consider contributing a bigger chunk to reduce taxable income and possibly drop into a lower tax bracket. Pair this larger donation with "bunched" itemized deductions one year, then take the standard deduction in the off years.
Qualified Charitable Distribution (QCD)
Ideal for those at the golden age requiring IRA withdrawals, i.e., pesky Required Minimum Distributions (RMDs), a QCD offers a savvy way to help your favorite charities and yourself. Send up to $105,000 directly to the causes you care about instead of taking the RMD to keep your taxable income lower while preventing potential hikes in your Medicare premiums and sidestepping any limits tied to your Adjusted Gross Income (AGI). It's a heartfelt way to give back while keeping more money in your pocket.
Charitable Remainder or Lead Trusts (CRTs/CLTs)
With these trusts, gift assets like stocks or property into the trust, and both parties receive payouts over time. How much, who, and when depends upon the type of trust and how it is designed. The cool part is you can take the deduction now—though it’s not dollar-for-dollar—and avoid capital gains taxes on highly appreciated assets. Setting up a trust involves some costs, but it can help turn high-value assets into more accessible funds with a smaller tax hit.