Tax-Advantageous Ways to Gift to Charities: Beneficiary Designations on IRA’s

A 30-second read by Nicholas Scheibner:  One of the easiest ways to gift money to a charity in your estate plan is to name the charity as a beneficiary on your IRA or 401(k).  Upon your death, the beneficiary designated on an IRA or 401(k) will receive their percentage of the assets very quickly.  In addition, the designated beneficiary is independent of the will.

If you have an IRA, with $100,000, for example, you can name your children as 80% beneficiaries and a charitable organization as a 20% beneficiary.  When you pass, your children will inherit $80,000 and the charity will receive $20,000.  You can do this very easily by contacting the custodian who holds your investments.  You do not need to update your will in order to name a beneficiary on a retirement account.  

Contact Baron Financial Group to discuss tax-saving gifting strategies.

Disclosure: This material is not intended to be relied upon as a forecast, research, tax or investment advice.  Please consult your financial planning and tax professional for personal advice.

The Most Common 1099-R Codes When Filing Your Taxes

A 60-second read by Nicholas Scheibner:   You will receive a form 1099-R if any money has been moved out of a retirement account.  How much you will pay in taxes will depend on how the money is moved. You want to make sure any movement out of a retirement account is done properly, and the correct code is applied when you file your taxes.  The code will appear in box 7 of the 1099-R. 

Here are some of the most common codes used on the form, and what they mean:

Continue reading “The Most Common 1099-R Codes When Filing Your Taxes”

NJ Tax Payers: Make Sure You Always Claim Your Medical Expenses

A 30-second read by Nicholas Scheibner:  New Jersey is certainly not known as a “tax-friendly” state.  However, the garden state has a much lower threshold on medical-expense deductions than the federal government. New Jersey allows certain non-reimbursed medical expenses to be deducted after they exceed only 2% of your gross income

A few examples of things you should make sure you keep track of throughout the year:

  • Medicare Insurance Premiums
  • Dental Insurance Premiums
  • Doctor Co-pays
  • Out-of-pocket Prescription Costs
  • Eyeglasses and Vision Exams

This is commonly overlooked by taxpayer’s who do not itemize their deductions.  However, if you make $60,000 gross income per year, 2% is only $1,200.  For most people, their medical expenses will exceed that 2% as long as they keep track of all of them.

As always, if you have any further questions, don’t hesitate to contact the Baron Financial Group Team.

Disclosure: This material is not intended to be relied upon as a forecast, research, tax or investment advice.  Please consult your financial planning and tax professional for personal advice.

Tax-Advantageous Ways to Gift to Charities: Gifting Appreciated Stock

A 30-second read by Nicholas Scheibner:  You may have a stock in your brokerage account that has a very large gain since you originally purchased it.  If you were to go and sell the stock, outside of a retirement account, you would pay taxes on the profit you made on the investment.  This is called a “capital gain”.

In many cases, a stock with a very large capital-gain may be a large portion of your overall portfolio.  This can provide unneeded risk in the event the stock loses significant value.

One strategy to avoid having to pay the capital-gains tax on a stock with appreciated value is to gift the stock to a charity.  You can get a tax deduction for a portion of the gift, and the charity will not have to pay taxes on the stock when they sell it. 

You will need to check with your charity if they are able to accept stock transfers as gifts.  Also, you can look into establishing a “Donor-Advised Fund” which can help you sell appreciated stock in the account and gift the remaining money to a charity, tax-free with a deduction.

Contact Baron Financial Group to discuss tax-saving gifting strategies.

Disclosure: This material is not intended to be relied upon as a forecast, research, tax or investment advice.  Please consult your financial planning and tax professional for personal advice.

Tax-Advantageous Ways to Gift to Charities: Charitable RMD’s

A 30-second read by Nicholas Scheibner:  If you are the owner of an IRA (Individual Retirement Account) you may be aware that at age 70 ½ you are required to withdraw a small portion of your account and pay taxes on the amount withdrawn.  This is called the “Required Minimum Distribution” or “RMD.”  The RMD is determined by the IRS (Internal Revenue Service) and applies to any retirement assets that have been “tax-deferred.”  At 70 ½, the approximate amount you must withdraw from your IRA is about 3.5% of the account value.  As you age, this number goes up based on the RMD calculations from the IRS.

What if you do not need the money from your RMD?  A great option if you do not need the money from your RMD is to write a check directly to a qualified charitable organization.  Writing a check directly from your IRA to a charitable organization will qualify as a “Qualified Charitable Distribution” and satisfy your Required Minimum Distribution for that year.  The main advantage to doing this is to avoid having to pay taxes on your RMD withdrawal.  Any withdrawal from an IRA is normally taxed at your ordinary income rate, except for a “Qualified Charitable Distribution”.

Contact Baron Financial Group to discuss tax-saving gifting strategies.

Disclosure: This material is not intended to be relied upon as a forecast, research, tax or investment advice.  Please consult your financial planning and tax professional for personal advice.