There are many ways to share your wealth. Following IRS rules can even give you a nice reduction in your annual tax bill. Tax planning allows you to give more to your favorite charity and maximize tax deductions.

  1. Cash/Check donations – always remember to keep good records of your donations and get receipts. Canceled checks are best backed up by a letter from the organization.
  1. Non-Cash donations – (clothing, household items, etc.) – again remember to keep good records of your donations and get receipts when possible. Your deduction is typically 25-30% of the Fair Market Value of the items donated.
  1. Charitable Giving accounts (Donor Advised Funds) – DAF’s allow you to donate securities & receive a current year tax deduction for the current market value. The funds are invested & available to make grants to any qualified charity (501(c) (3) organization. Charitable Giving account offers benefits such as:
    • One consolidated tax receipt.
    • Save taxes on appreciated securities.
    • Receive a tax deduction when taxable income is high.
  1. RMD (Required Minimum Distribution) at age 70 ½ and beyond from your IRA account. You can fulfil your RMD & be generous at the same time by having a check sent directly from your IRA account to a qualified 501(c)(3) organization. The benefits of this type of donation are:
    • RMD’s are added to your gross income. Donating directly to a charity counts toward annual RMD & doesn’t increase Adjusted Gross Income resulting in lower taxes.
    • Doing this could reduce the amount of taxable Social Security. RMD’s are added to your AGI which could possibly make some of your Social Security income taxable.
    • Reducing your cost of Medicare Parts B & D –Medicare premiums are based on your AGI.
    • Tax deduction if your standard deduction is higher than itemized deductions
    • Overcoming the 50% limit on charitable contributions
    • Shrink your Net Investment Income Tax – (3.8% NIIT on investment income when your AGI is greater than $200,000 ($250,000 for joint returns). RMD’s might move your AGI above these amounts.

You can review 501(c)(3) Charitable Organizations @

Here you can find star ratings, tax status, contact info, financial information, etc.

A little tax planning can stretch the amount you give to charity and reduce your tax bill. Tax planning is a year round event. Not something to think about once a year when your taxes are prepared.

We encourage clients to max out workplace retirement accounts when possible (401k limit is $18,000 annually, or $24,000 age 50+).  At a minimum, contribute as much as your employer will match; its free money! The employer matching is often structured as $.50 cents for every dollar you defer, up to 6% of your salary, effectively a 3% raise.

However, with some plans, aggressive saving and maxing out before year end can actually reduce the company match. For example:

A worker earning $10,000 each month saves 20 percent of earnings in a 401(k) for which the employer matches dollar-for-dollar up to 6 percent of earnings. That means that in the ideal situation, the worker would receive 6 percent of $120,000, or $7,200, in matching contributions. But by saving $2,000 each month, the worker will hit the $18,000 limit after just nine months. As a consequence, that worker might only get credit for nine months’ worth of matching contributions, or $5,400, giving up $1,800 in matching.

Some plans do allow for this and offer a “true up” provision to make the full match regardless of timing.  However be sure to check your plan if you are maxing out before year end.  If no true up provision, spread your contributions throughout the year.

For a deeper analysis, start with the questions:

  • What is the matching formula?
  • How often are matching contributions made (per pay period, monthly, quarterly, annually)?
  • If maxing out early, do they provide “true up” contributions?

BUT….if you are concerned you will not be with the employer for the full year, you may still want to consider maxing out early.  Either due to not having a plan for remainder of year or not being eligible for match with new employer.