Tax-Efficient Charitable Giving for Retirees (followed by YT description/chapters and shorts/clips)
Freddie: Charitable giving in retirement isn't just generous. It can be a smart financial move. In this episode of Label On Fire, we explore how strategies like qualified charitable distributions asset donations and donor-advised funds can reduce taxes, satisfy RMDs and support causes you care about.
Learn how to give with purpose while avoiding common mistakes on the next label on fire.
Hello and welcome to Label on Fire. I'm Freddie Bell with Label Sternbach. Author of Living with Financial Anxiety and Authenticity. I'm feeling charitable today and I'm wondering what are the most tax efficient ways for retirees to give to charity in 2025, including strategies like Qds and appreciated asset donations
Leibel: let's start at the basics and work where our way up. So the simplest way, right, is you give, you know, the smart way. Give and get a receipt. Make sure you get a written receipt with a tax number if you're giving to Big Brothers, big Sisters or any of those things, make sure you itemize what you're actually donating and the value of it.
And you have some kind of valuation, which is one of the reasons why it's better to go into like a Goodwill store where they'll give you a receipt for every specific item and with a value than to do it yourself. But having said that, right, so if you're itemizing your deductions, charitable giving is good
if you're 70 and a half and older and 70 and a half, you may be wondering why it's such a weird age. That has to do with when RMDs used to be. When they changed the rules about RMDs, they didn't change it for qualified charitable distributions.
Qualified charitable distributions allow you to take money from traditional retirement accounts and donate it directly to charity. And to use that to satisfy your work require minimum distributions. So that is. If you have RMDs and you plan on giving it to charity anyways, that is one of the ways to satisfy your RMDs and not get taxable income on your tax return.
When you think dollar for dollar, a charitable donation versus A QCD, you get more from the QCD because it never hits your tax return you have to itemize deductions to get the credit.
And maybe you have enough, maybe you don't there's a straight line, from you to the charity, and passes go, doesn't collect $200, right? It doesn't go on your tax report. Mm-hmm. So QCD is a very great way to give charity if you're giving it. Obviously there are limits to how much you can give,
Freddie: hearing what you're not saying. Sounds like a lot of retirees miss this opportunity
Leibel: A lot of retirees who give. Charitable donations, may miss out on this. They may not think about it, especially since when we think about retirement, right?
Most of us start our retirement journey before 70. People who give to charity, their whole life. Don't think about where or how they're giving it. And so they're giving it while they're working and they give whatever they give, and then when they retire,
and they don't think about, how do I make this more efficient? How do I give, how do I make my charitable giving the most tax efficient way possible? Frontloading Charitable donations is a great way to reduce your taxes.
Freddie: Everybody we're talking to label Sternbach about charitable giving. How can a retiree align their values with the places they give money while ensuring their donations go to trustworthy? Impactful charities.
Leibel: That's a tough one. It depends on the mechanism and dollar amount you're giving. And so it really depends. And, and I think, so one of the questions that I also pose to people who this question comes up with is, what do you plan on having happen when you pass? Where do you want your money to go? If you tell me like, oh, okay, I, you know, I tithe, I give to my church, I give to whatever.
It is not, you know, you're not giving large sums of money and maybe, you know, whatever, 10, $20,000 a year, that's fine, but you're not giving your entire wealth. Every now and then I talk to people and they're like, I don't want it to go to my kids, or I want it to all go to charity.
When people say they want a large amount to go to charity, it changes the game. We are talking about the vast majority of our wealth for charitable acts, which means now we can figure out how do we get one a tax deduction while we're still alive, right?
Because it doesn't benefit us when we're dead to get tax deductions. How do we get that while we're alive? How do we put some of this money to use while we're still alive so it goes to the programs and gets used the way we want
You have a few thousand dollars to charity. You generally don't get a say on what happens with it. However, you start giving large sums of money, you are probably able to fund specific programs and you probably have specific things you're passionate about, right? Whether it is that you wanna make sure that you know people, you know, you know, get an education, right?
That you wanna pay for underprivileged people to go to college, right? Or you want to pay for an afterschool program, or, maybe you were on, the basketball team and you wanna fund the program to ensure that people have that experience, right?
Everyone's got their specific thing that drives them, that they're passionate about. And what I recommend to people inclined is, let's figure out how to create the program while you're still alive you can fund it, ensure it's
being used the way you want give it to someone else, or hire someone to manage the program so it continues in your name, create a living legacy because charities and private foundations can live on for eternity, whereas businesses won't last forever.
You know, gifts to children won't last forever, but charities can last forever.
Freddie: So not taking that proactive step, is that one of the common mistakes retirees or people approaching retirement, make when talking about charitable giving?
Leibel: They don't think long term.
Right. I see. They don't think about, like, so they don't think about, you know, what, is this gonna be over 20, 30 years? What happens when I'm gone? What do I really want this to be? The other thing that they don't think about is how do I make this a tax benefit while I'm still alive? Just because we're doing something nice doesn't mean we can't get something in return.
The government wants to incentivize us to give to charity. They see charities and nonprofits supplementing government welfare programs, working alongside the government to provide essential public services.
They give all kinds of tax incentives the United States has one of the largest and the most prolific tax incentives, when it comes to charitable gift, giving than anywhere in the world. Right? Wow. It's, there's a reason why there's so many churches in the United States. It's not because we're super religious.
Freddie: What can we [email protected]?
Leibel: [email protected], we've got resources for charitable planning and charitable resources. We've done podcasts on specific topics in this related to this.
However, again, I recommend you very much if you're inclined reach out to us. Go through the retirement tax analysis. One of the questions we got in there when we do it is, you know, what do you wanna have happen with your money when you're gone? Right. Are you charitably inclined?
Tell us. There's two types of planning one is if you're dying very different planning. If you are dying. The other is if you want your money to go to charity a very different planning scenario than people who want to die with zero spend it all or give it to their kids.
Very different planning. Let us know 'cause we will create a plan for you. We'll help you figure out the options available the most tax effective and get you the outcome you're looking for.
