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Tax Strategies when donating 100% of your Income to Charity
Manage episode 307834766 series 2910154
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It’s not often that you are in the position to donate 100% of your income to charity. However, if you find the capacity and willingness to give, this year has special tax rules that you should be aware of.
The IRS is allowing a 100% deduction off your taxable income for charitable donations. This means that you are left with $0 in income and owe $0 in taxes! While that sounds wonderful, please don’t stop there! You want to take advantage of the following opportunities while your income tax bracket is low:
- Roth Conversions: Consider moving money from your Traditional account to a Roth account. You must pay taxes on the converted amount, so do that while your bracket is low!
- Capital Gains Harvesting: If you have no income, you can sell appreciated stock with up to $80k of capital gains and pay $0 instead of your typical 15-20%.
- Withdrawals from Tax-Deferred accounts: This counts as income, so it’s a good year to pay taxes on that income while giving money away.
- Portfolio Rebalance: Again, a good time to sell appreciated stock and rebalance your portfolio when your income is low.
Note: The 100% deduction must be made in cash directly to charities (not Donor Advised Funds or Private Foundations). This may not be the best tax strategy if you do not have cash and need to sell appreciated assets. Check with an advisor first!
Find out more about Mike at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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