New (And Old) Ways Giving To Charity Can Lower Your Income Tax Bill

If you are struggling to digest all of the new tax laws and tax law changes, you are not alone. The rules have only gotten more complicated. Fortunately, some of the ways to save on taxes are still effective.

What Still Works:

Gift appreciated stock – As you plan your charitable gifting for the year, don’t forget that you can avoid the tax on appreciated securities by gifting them instead of selling them. You also may get to take a charitable deduction for the gift, so you may save in two ways! The savings are further magnified for those with high incomes (singles with adjusted gross income (AGI) over $400,000 and marrieds over $450,000), where the tax rate on capital gains and dividends is now 20% AND this investment income is possibly subject to the new 3.8% Medicare surtax.

Reinstated for 2013:

Gift up to $100,000 of your IRA required minimum distribution (RMD) – Want to take some income right off your tax return? If you are going to be 70 1/2 or older this year, you need to give this some serious consideration. There is no lower limit, so even if you typically gift $1,000 or less or you have a small IRA, it helps! The gift lowers your taxable IRA withdrawals, but cannot be used as a charitable deduction. But this can be MORE effective than a charitable deduction because the latter is now at risk of being lost at high incomes (3% of the excess AGI over $250,000 for singles and $300,000 for marrieds, not to exceed 80% of itemizations). And if you need one more reason, it may also keep your income down low enough to keep you from paying a Medicare Part B premium. These premium surcharges start at modified AGI of $85,000 (singles) and $170,000 (marrieds) and can be as large as $297.40 a month each!

About the author

Michael Helveston, CFP®, CRPC®

Mike Helveston, CFP®, CRPC® is Director of Adviser Services at Rodgers & Associates. He manages the team of advisers and is responsible for maintaining the firm’s financial planning process. In addition, he provides comprehensive tax, estate and investment planning advice to guide our high-net-worth clients toward their financial goals. Mike joined Rodgers & Associates in 2007 after starting in the profession over 15 years ago with Vanguard.

Mike is a contributor to Forbes, has been quoted in the Wall Street Journal and has also appeared on television and radio discussing various financial planning issues.

Mike has served the community as a volunteer mortgage counselor with Tabor Community Services, a student financial literacy volunteer for Junior Achievement and as a mentor through Bridge of Hope. His hobbies include running, golfing with friends, listening to music and watching professional sports. He resides in Downingtown, PA with his wife and three children.

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