Investing or Tax Advice (not determined)

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minskbelarus47
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Investing or Tax Advice (not determined)

Post by minskbelarus47 » Wed Jun 12, 2019 12:45 pm

Our situation: 24% bracket, both doing RMD's this year, will be able to itemize.

So, to my favorite charity, do I write a check out of cash account, or do I do a QCD. What gives me the better advantage, or is it a wash.

Is it more advantageous to do a QCD (which reduces income - but it won't put us in a lower bracket), or;

will we get more benefit by just writing a check out of our taxable account to a charitable institution and having it as a deduction. Assume that we will have easily met deduction requirements with pre-paid medication deductions.

Also, we are thinking of using a highly appreciated stock in a taxed account for a charitable entity, or to write check from taxed cash, or do a QCD. Advantages? Disadvantages?

Thanks for any advice. Blessed to have these choices.

MB

livesoft
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Re: Investing or Tax Advice (not determined)

Post by livesoft » Wed Jun 12, 2019 12:47 pm

Have you filled out your tax returns with tax prep software for 2018? 2017? 2016? Your answers to those questions will determine the rest of my response.
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Topic Author
minskbelarus47
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Re: Investing or Tax Advice (not determined)

Post by minskbelarus47 » Wed Jun 12, 2019 1:32 pm

Yes.

We were not able to itemize 2018 due to the SALT limitations capping us at 10K, and we cashed in about 50K in stocks, and we did some QCD's, figuring that indeed we were not able to itemize. We had not moved yet or sold home.

Fast forward, in 2019 we have moved into a wonderful retirement community (life care), so with our entrance fees we get a one time 47K pre-paid medical deduction, then we can also deduct an additional 25K for pre-paid medical. Then, in the ensuing years, we will have at least 30K in prepaid medical, and additonal taxes, etc, from a home in Florida.

Note, in PA we will not pay taxes on retirement income, SS, or 401K distributions.

So, by meeting the requirements for itemizing, are we better off just writing a check from our taxable account, or should we take it as a QCD from our RMD's. Or, is it a wash. Anticipate that we will still be in a 24% bracket.

I hope this gives you enough info. We do Turbo tax, but life is too crazy now with moving in to pull all that up again.

Thanks in advance.

livesoft
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Re: Investing or Tax Advice (not determined)

Post by livesoft » Wed Jun 12, 2019 1:42 pm

Since you are very familiar with TT, the answers to your questions will come from using TT to model your 2019 and 2020 tax returns by plugging in your scenarios.

Certainly, at least tax-wise giving appreciated shares held long-term to charity is better than given cash to charity even if one does not itemize by avoiding capital gains taxes and avoiding using up carryover losses. And QCDs reduce AGI without the need to itemize.

But the details will come from your models. I would not expect anyone to run models for me.
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minskbelarus47
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Re: Investing or Tax Advice (not determined)

Post by minskbelarus47 » Wed Jun 12, 2019 2:00 pm

Just thought this question comes down to

If you can itemize, is there a greater benefit to income and taxes to itemize (increasing deductibility) a contribution versus,

if you can still itemize, is doing a QCD better (that does not count as income, but counts toward your RMD requirement).

If you take medical expenses, you have to meet the 10% in income requirement. We will meet this, at least this year.

Any easy thoughts???

Chip
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Re: Investing or Tax Advice (not determined)

Post by Chip » Wed Jun 12, 2019 2:04 pm

Since you are itemizing medical, QCDs will increase your medical deduction. The 10% you have to exceed is 10% of AGI. QCDs reduce AGI, while a charitable deduction on Schedule A does not.

AGI also affects social security taxability and Medicare IRMAA penalties. So reducing AGI is generally a good thing.

fabdog
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Re: Investing or Tax Advice (not determined)

Post by fabdog » Wed Jun 12, 2019 2:13 pm

We can generalize all day long... but the devil is in the details on these items... so "broad based" truisms may or may not work out well for your particular situations, as you mentioned the medical deductions as well, which would point towards reducing AGI...

But as noted above, no real substitute for plugging in your actual numbers to run... if you used TT for your 2018 taxes, super easy to make a copy of your return to play with and run the different scenarios. And don't forget to check how QCD vs itemized deductions impacts state taxes.

That will produce the most accurate answer for your specific situation

Mike

Topic Author
minskbelarus47
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Re: Investing or Tax Advice (not determined)

Post by minskbelarus47 » Wed Jun 12, 2019 3:15 pm

No State income taxes. PA...

Need to go back to our TT, but good to see the affect of AGI on other things. Seems better to reduce AGI overall.

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grabiner
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Re: Investing or Tax Advice (not determined)

Post by grabiner » Wed Jun 12, 2019 11:04 pm

minskbelarus47 wrote:
Wed Jun 12, 2019 12:45 pm
Also, we are thinking of using a highly appreciated stock in a taxed account for a charitable entity, or to write check from taxed cash, or do a QCD. Advantages? Disadvantages?
Giving the appreciated stock is better than giving cash, as long as you stay under the 30% of AGI deduction limit for giving appreciated property. If you wish, you can give the stock, then use cash and buy the stock right back, getting rid of the capital gain.

How much is it worth? This depends on whether you will eventually sell that particular share of stock. For a fair comparison, you would compare donating cash versus donating stock and buying an equal amount of stock (the same or other stock), so that you have the same stock risk either way. Thus, whether you donate the stock or cash, you will receive the same dividends. If you would otherwise sell the donated stock eventually, then donating the stock saves you the capital gain, which will be close to 15% of that stock's value. If you would otherwise leave the donated stock to your heirs, then donating the stock gains you nothing.

This needs to be weighed against any additional tax savings from a QCD, such as from the increased medical deduction and possible IRMAA savings.
Wiki David Grabiner

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