5 Tax Strategies to Consider Before Year-End

SPEAKER_1 (0:01)

Here's what's coming up on this edition of The Retirement Huddle with Mark Howard and your host Ron Stutz.

Mark Howard (0:07)

So it's one of those things that doesn't move the needle substantially. It can move the needle pretty substantially in a single year, but you start looking at every other year, every three years over a decade, and it's a sizable savings.

SPEAKER_3 (0:23)

It's time for The Retirement Huddle with your local financial coach, Mark Howard. If retirement is a game, you're in it to win it. The huddle is where your financial battle plans are drawn, and Mark Howard is here to help with the X's and O's. So let's kick it off and break the huddle. The Retirement Huddle starts now.

Ron Stutz (0:50)

You know, a lot of people don't really spend a lot of time thinking about ways to reduce their taxes until the end of the year, and they try to cram all kinds of things in, and it's really, you know, you can't do it, or it's too late.

A lot of people don't even think about taxes until maybe March when they're preparing their tax returns, and then they find out certainly that it's too late. So, Coach, let's discuss what we might be able to tackle now to help with this year's taxes. Ready for this little exercise here?

Mark Howard (1:24)

Yeah, this is an area where I think we add a lot of value to our clients' lives, and we deal with so many people that have had investment advisors in the past that have never asked to see their tax return. We want to see it, and there's a lot of great strategies out there to keep money in your pocket, and we're very well aware of them. So, yeah, hit me up. Let me see if I can come up with some thoughts here.

Ron Stutz (1:45)

Well, one thought that crosses my mind, and it's because you and I have talked about this in the past, you might want to consider opening a donor-advised fund. Coach, what is that and how does it work?

Mark Howard (1:57)

Yeah, good question. We love these.

If you're charitably inclined already, in other words, if you make charitable donations often, church, wounded warriors, folds of honor, humane society, whatever it is, this could be a pretty big part of your financial plan, because what a donor-advised fund allows you to do is make charitable donations to your choice of non-profit, but you open this fund and you can ensure that you donate more than enough to get a tax break when you itemize. So think of it as a flexible charitable savings account. That's a great way to look at it. You can invest in the fund now. You can make contributions to it. The fund can be invested, but the charitable donations can be distributed later.

So while you're at it, you don't want to be thinking about where you want those funds to go. So here's a scenario. Scenario would be you will already give $20,000 a year to churches and charities.

Well, your standard deduction, let's just say, is $32,000 on your tax return. So you're about $12,000 short. Well, instead of falling short, not being able to take advantage of that additional, you're not exceeding the standard deduction. So why don't we do this? Why don't we take two or three years' worth of donations? You're going to give the $20,000 anyway. Let's just take it and put it into this fund, this donor-advised fund. And now, all of a sudden, if we put three years in there, that's $60,000. We're getting a $60,000 write-off on our taxes this year. We can give the money out of the donor-advised fund anytime that we want to to the charities of our choice, but it can be making money for us as well. And then about every other year, maybe of the third year, we do the same thing. So it's one of those things that it doesn't move the needle substantially. It can move the needle pretty substantially in a single year, but you start looking at every other year or every three years over a decade, and it's a sizable savings in your taxes. So just a little trick, donor-advised fund, contribute to it, and then the donations to your charities go out of the donor-advised fund whenever you want to.

Ron Stutz (4:09)

Okay, that's one thing you can talk to Coach Mark Howard about and get even more details, a way to perhaps save money on your taxes for next year. And here's another one. I know that after doing this show with you for a long time, you have a lot of clients who are business owners, and a lot of folks who are self-employed out there listen to this show.