Hey guys. Matt Grahn with SC3F Wealth Management and on today's episode, we're going to talk charitable giving and two tax strategies that can help give you tax benefits when doing your charitable giving for 2023.

So before I jump into that, I just want to give a caveat  that for anything tax related,please take your advice from your CPA. So if you get an idea from the video today, take it back to your CPA, talk about it, and make sure that it makes sense for you personally.

So with that being said, let's jump in to tax strategy number one. 

So a lot of you already know this, but because of how high the current standard deduction is, especially in 2023 as it got raised again, the vast majority of Americans are using the standard deduction. And as a result, they're not getting any tax deduction or benefit from their charitable giving. So unless they're itemizing. So I want to talk about a strategy that could help on that. 

So let's say that there's a family who maybe gives $500 a month to church or charity. So that's $6,000 a year. Okay. If they're writing that out of their checking account and they're taking the standard deduction for the year, they're not receiving a tax deduction or benefit. So one strategy is using what's called a donor advised fund.

So let's say that same family has the ability to frontload maybe two, maybe three years of charitable contributions into a donor advice fund. So in that same example of $6,000, maybe they actually could donate $18,000 this year, even though they're still going to give it out the same as they were before $500 a month. So in that example, a family could make the $18,000 contribution to a donor advice fund and maybe that's enough for 2023 to allow them to itemize so that they receive the charitable tax deduction and the tax benefits from doing that. And then they still, like I said, give it out over time.

Now, a few benefits from that. Number one, they would get the full $18,000 tax deduction in this year by you by itemizing using that strategy. But secondly, they also, let's say they donated appreciated securities, that they paid $10,000 for, and now it's worth $18,000 when they donate it. They also avoid paying the capital gains tax on that $8,000 gain. So in addition to that, they can invest the money once it's in the donor advised fund, and hopefully that grows over time as well.

So that's a great strategy for someone who can frontload future charitable contributions and help them to itemize and receive a tax benefit in the current year.

So second strategy I wanted to talk about today is specifically for individuals that are 70 and a half or older. So with individuals 70 and a half or older, most of them are also taking the standard deduction. But by using something called a QCD or a qualified charitable distribution, they can have funds from their I.R.A. brokerage account sent directly to the charity. And as a result of doing that QCD, it lowers their taxable income for the year as they're not receiving that income. It's going to charity.

So that's a great strategy for individuals 70 and a half or older, and it's especially great for individuals who are 73 or older who are required to take their RMD or required minimum distribution out of their IRA. If that individual is not using that income to live off of and they don't need that income, why not have that sent to their charities of choice and thus give them the tax benefit of not paying income taxes coming out of the IRA? 

So that's also a great strategy for individuals of that age demographic to be able to use.

I hope that between these two strategy is maybe one of them resonates with you. Feel free to call me if you have questions or talk to your CPA.

And thanks for tuning in today.