e, being a thoughtful spouse, paying real estate taxes, and
orrying about the overall health of your lawn. My wife may
t share that last sentiment...
INDUSTRY INSIGHT
YOUR FINANCES
SPONSORED CONTENT
Staying charitable to charities –
not the IRS
has been the most exciting, joyous, and fulfilling time of
y life. That said, even as a financial planner, it hasn’t been
thout its nagging thoughts: Am I saving enough? Am I
king advantage of my benefits through work? Should I be
inking about saving for college already? Would my fam-
be okay (financially) if something terrible happened to
individuals are considering donating to
e? Should I have an estate hen
plan
in place? What the heck
charity, their sole focus is supporting a cause,
a Bumbo?
W
aiding in a project, or helping those in need.
Their personal benefit doesn’t enter into the
though a lot of these issues are uncomfortable to discuss
equation. That said, in the past, it was fairly straightforward –
d an added being
expense
during an already expensive time,
charitable generally resulted in a lower tax bill. Since the
ndling them introduction
now will not
only
give
you
peace
of mind
but
of the
2018
Tax
Cuts
and Jobs
Act, however,
that is
olid foundation
for
securing
your
family’s
financial
future.
no longer the case.
Several revisions were implemented under the new tax reform.
ollege Planning
With regard to deductions, the two critical changes were the $10k
cap placed
on SALT an
deductions
local, real
estate taxes) and
you know, college
is already
(almost (state,
illogically)
expen-
the substantial
the standard
deduction of
(roughly 2x).
ve journey. That,
however, increase
is not of slowing
the majority
The combination
these tax
code
adjustments
is leading
ivate colleges from
increasing of
tuition
year
after
year. If it’s
many to
to help
claim the
standard
the first
time in years.
ur family’s wish
cover
some deduction
or all of for
these
costs,
And
because
of
that,
charitable
contributions
are
no
art saving when they’re in diapers. The earlier, the better. longer
reducing
two automatic
strategies – month-
the qualified you’ve reached retirement, you’re no longer relying on wages
ok to establish
a 529 one’s
plan tax
and bill.
set Enter
up an
charitable
distribution,
and
bunching
contributions,
to sustain your family’s lifestyle. From that mindset, term
contribution for an amount that fits into your cash flow. also referred
as front-loading.
life insurance is truly the most effective (and cheapest!) way
u won’t even to notice
it after a few months. Also, let the
andparents know.
They CHARITABLE
just may want
to lend a hand.
QUALIFIED
DISTRIBUTION
to go.
A qualified charitable distribution or “QCD” is a powerful
strategy for those who have reached age 70½. This age is also
So how do you know how much to purchase? If you’re not
ork Benefits
as the and
Required
Distribution
age or “RMD”
running a thorough analysis on your existing portfolio,
though there known
are many
they Minimum
will differ
from company
Upon to
reaching
RMD age,
are required to start
anticipated growth, and future cash flow, a good rule of
company, I age.
wanted
highlight
one individuals
in particular—the
distributions from their IRAs, 401(k)s, and other retirement thumb
plans, is 10x salary. Have a qualified adviser go out to bid
ependent Care
Flexible Spending Account. This account
whether they need the funds or not. These distributions are
to find a reputable insurance company that will provide that
ows the parent to set aside income before taxes in order
federally taxable.
coverage at the most cost-effective rate. If you’re not in
help pay for the costs of childcare. Depending on your tax
The QCD strategy allows you to send funds directly from good health, if you smoke, or have a family history of heart
acket, this can easily save you 20 to 30% on what you elect
your IRA to the charitable organization. By doing so, you satisfy
for instance, the low-cost alternative may be to
contribute. a portion of your RMD and avoid recognizing that amount disease,
as
obtain
that level of coverage through your employer. They
taxable income. Not only does this save the average taxpayer 15-
will likely offer guaranteed coverage at group rates for up to
fe Insurance
20% in federal taxes, but it can also help lessen exposure to Social
some multiple of salary.
e focus of life
insurance
is Medicare
to cover Part
a period
of time
in
Security
taxes and
B premium
increases.
hich your family
is financially
window
In short,
this strategy vulnerable.
is a no-brainer This
if you’re
RMD age,
Continued.
liability typically
exists
during
working with
years.
Once
charitably
minded,
and your
not enamored
higher
taxes.
Note:
This
article
is
for
financial
planning
purposes.
Please consult
So, what if you haven’t reached age 70½?
with a qualified tax professional for advice on your specific situation.
BUNCHING CONTRIBUTIONS
If you’re unable to itemize deductions given the reasons
outlined earlier, then you’re not realizing any tax savings on your
charitable contributions. This introduces a second strategy—
bunching contributions or front-loading.
As an example, this approach would entail doubling or tripling
This Industry Insight was written by Matthew D.
your typical annual donation in a given year – then subsequently
Kelly, CFP®.
foregoing donations in the following two or three years. In the
As an advisor with Allegheny Financial Group, Matt
helps guide individuals and families toward achieving
present year, you’d overcome the standard deduction, increasing
their distinctive financial goals. Matt and his wife,
tax savings. In the succeeding years, you’d take the standard
Mia, live in Mt. Lebanon with their two kids and are
deduction – no different than you would have otherwise.
enjoying family life in such a friendly community.
This strategy obviously hinges on your after-tax portfolio
For a better understanding of how Matt
and cash flow capacity. Assuming its feasibility, front-loading
could work with you and your family,
please call him at 412.536.8076 or email at
can be further amplified by using a charitable gift trust and/or
[email protected].
transferring appreciated securities.
Allegheny Financial Group is a Registered Investment Advisor. Securities offered
Reach out to a CERTIFIED FINANCIAL PLANNER™ to learn more
through Allegheny Investments, LTD, a registered Broker/Dealer. Member FINRA/
and determine whether these strategies make sense for you and
SIPC.
your family. Have a happy and safe New Year!
MT. LEBANON
❘
WINTER 2019
11