The holidays will be here before you know it – and right behind the good tidings and joy follows the countdown to the end of the tax year.
Ruth Springer, First Vice President of Investments at Raymond James & Associates, Inc., says that November is a great time to start thinking about year-end giving strategies to help lighten your income tax burden while supporting a favorite charity. By donating your required minimum distribution (RMD) to a qualified charity, you can enjoy the satisfaction of knowing you are helping a worthy cause while simultaneously reducing your taxable income. In fact, Springer and the Raymond James staff typically suggest that their clients give with both their head and their heart when thinking about making charitable gifts.
“If you can help out a charity and pay less taxes, that’s a win-win,” Springer says.
Using the required minimum distribution (RMD) to make charitable donations is formally known as a Qualified Charitable Distribution (QCD).
The RMD is the minimum amount a person must withdraw from their retirement plan annually once they reach a specific age. “For those individuals who are already charitably inclined, using the RMD to fund their donation may make sense,” Springer says. “Since you have to take the money anyway, if a client is already planning to give charitably, they could accomplish both using their RMD.”
RMDs aren’t the only year-end giving strategy. Others include giving the gift of money or securities. According to Raymond James, if you itemize, you can make charitable contributions by making a cash donation postmarked by Dec. 31, 2022. “Contributing long-term, appreciated securities allows you to avoid paying capital gains tax,” Springer says.
Regardless of which avenue(s) you choose for your giving, Springer recommends working with a tax professional and financial advisor.
“There are always rules to follow, but a little planning goes a long way,” she says.
Consider whether you:
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Ruth Springer and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. RMD’s are generally subject to federal income tax and may be subject to state taxes. Consult your tax advisor to assess your situation.
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