Three ways to give and cut taxes: move $20,000 from your IRA directly to charity through a QCD, gift appreciated stock to kids in lower tax brackets, or fund a donor-advised fund for an immediate deduction while deciding later where the money goes.
Talk about some of the things that are available to people who are charitably inclined as a way of mitigating taxes. I'm going to give two. One of them is an external charity. The other one would be an internal charity. So is that the Nolan Langford charity? I'm going to put my account number on the screen. Or do you guys transfer all your sheebar code? One is if I'm charitably inclined and I have money in an IRA and I have to take money out of an IRA for whatever reason, a lot of cases it's required minimum distribution that triggers a distribution. So I turn 72, 73, depending on my age, the IRS tells me I need to take $20,000 out of my account. And basically that $20,000 then goes on my 1040 and I have to pay taxes. Yeah. Well, instead of doing that and paying taxes, let's say, for example, my church here, I— there's a building fund at the church and I really want to give them some money. I can actually just take the $20,000 from my IRA and give it to them directly. It doesn't go on my 1040 as income, doesn't hit me in any way, and they get all $20,000. No, the duh duh duh. And you can do this generally to any 501(c)(3), college, university scholarship fund, church, etc. And so we see that a lot. That's a way for you to decrease your income and also increase your charitable giving. It's a good thing. Okay. But there's another way to do this as well. Imagine I have a stock portfolio and I was lucky enough to buy Netflix or Nvidia or Meta a few years ago. And so I have these shares that were $50,000. I only paid $20,000 for them. So I have an embedded unrealized taxable gain of $30,000. Now, if I have kids or grandkids, I can gift them those shares. And now the tax goes from me being in the 37% bracket. If it's my grandkids, they may be in the 0% bracket, or my child's. So that would be another way to sort of take advantage of taxes and kind of pass it on. Okay. And then there are also these things called donor advised funds that probably doesn't make sense to go into too much detail, but that's another opportunity there as well. Correct. So I may want to be charitably inclined, but not necessarily have a charity picked out. United Way, should it be the Heart Association, Cancer Association? Not really sure. But by December 31st, I need to do something because I need to— Yeah. Transaction. You could put the money in what we call a donor advised fund. I don't have to name the specific charity, but I get the deduction just because I put it in there. Later on, I can decide who the money gets distributed to.
