Anthony Saffer VP / Financial Advisor CFP®, CKA®,

Alex Okugawa  / Financial Advisor CFP®, CKA®, CEPA® 

Anthony Saffer 0:00
Most people are throwing away tax deductions by not carefully planning their charitable giving, if you want to learn about charitable stacking and how that can help you stay tuned.

Anthony Saffer 0:09
So, Alex, most people give because they want to. They tie it to their church, they give to causes in their community that are important to them. But it doesn’t mean that the tax breaks are not important. So what should we be thinking about with new tax reform?

Alex Okugawa 0:32
Yeah, so that’s the thing is taxes throughout your life-time are likely to be one of your largest expenses. So although like when you give charitably that might not be top of mind. It is something that you should be aware of in making sure that you’re taking advantage of.

Anthony Saffer 0:49
So tax reform has really changed things over the last couple of years and charitable stacking, how can that help explain what that is?

Alex Okugawa 0:56
Exactly. So essentially, when you file taxes, you have a choice to make, you can either take the standard deduction, or you can itemize your deduction. And for folks that are are givers, they’re probably very familiar with itemized deductions. Which is, you know, however much you gave to charity, qualified charities, you can use them to deduct on your Tax Return. But laws have changed. And essentially, more and more people are no longer itemizing their deductions, even those who are givers. And they ended up taking the higher standard deduction.

Anthony Saffer 1:31
Yeah. When I look at a lot of tax returns as well, even if they are itemizing. It’s like, well, we’re barely over the standard deduction, in some cases. So it really isn’t adding too much additional value.

Alex Okugawa 1:41
Exactly. So what givers can do, and this is we coined the term charitable stacking, if you will. And really what you do in this type of strategy is you do two years or more potentially two years or more of giving in one calendar year. And the benefit of this is that you get the full deduction of that two years’ worth of giving in one calendar year. Now what you do is you place those funds in what’s typically called a donor-advised fund, and we’ll link to what a donor-advised fund is how you use it to your benefit. But then within those funds in the donor-advised fund, you can basically dig them out over the two years. So two things. One, you’re getting basically a double deduction, if you will, in one year, and then two, you can divvy out those funds over your two years that you were planning on doing. The main benefit here is that in your off-year, you can take advantage of that higher standard deduction. So really, you’re maximizing your tax breaks while still accomplishing all of your charitable goals.

Anthony Saffer 1:41
So what this does is it puts the tax benefit or the tax deduction in your control, but also still gives you the flexibility of when you’re giving out exactly those funds to charity. And this is especially important for those that are in high-income states such as we are in California because people have lost or the cap has been on state taxes. So this is a way to help control them.

Alex Okugawa 3:07
Exactly.

Anthony Saffer 3:07
Yeah, we wrote a post on this back in 2019 on charitable stacking, we’ll post to that here in the notes here. If this is something that you’re interested in talking to us about. These are the types of things that we help people with, in conjunction with your tax professional. Go to our website and schedule a call with us we’d love to talk with you.