As we approach the April 18th tax deadline, we’ve been receiving more questions about how to save on tax returns. Last week I focused on Roth Conversions and IRAs, and here are more tax-saving strategies that may be used for 2022 taxes.

You may want to consider a Donor-Advised Fund (DAF). A DAF is a charitable investment account set up to support those charities that are important to you. For example, let’s say you have some highly appreciated stocks, you sold a rental property, and you had a prosperous earnings year. This means, you’ll have  a large tax bill coming due. But a DAF may help you save on your tax bill. Any assets, money, or securities you donate to this fund to support a public charity are counted as an immediate tax deduction. You can also space out your donations over 10-15 years. So, if you’re going to have a year with a large tax bill and you are also charitably inclined, this is an excellent way to commit an amount of money into a DAF that can last for 5, 10, or 15 years. But in the year that you donate, you have a tax advantage associated with it because it will mitigate your overall tax liability. The vital point in this tax savings strategy is to make sure you work with a Financial Advisor and a CPA who can help you do it correctly.  

When I ask clients to which charities they would like to give they’ll typically name their favorite charity. My next question is, have you looked at other alternatives? Why? Because if their donation source is an IRA, typically, they take the money out, pay taxes on it, and write a check. However, if the money goes to the charity with a DAF, then the client receives a tax deduction. Determining the best outcome is going to be different for everyone. 

Another option that may benefit clients is the  Qualified Charitable Distributions (QCD), which allows you to take money directly out of your IRA, and put it into another IRA in the name of the charity for a qualified distribution. At that point, you’ll receive a considerable tax advantage.. Qualified charitable distributions are one of the lesser-known, and most beneficial tax planning techniques that we have.

Every year when I have these types of discussions with clients, if I know they have a church they attend, I ask them if they give money to their church and how that is accomplished. The most common process is they have money from their retirement accounts deposited into their checking account. Then, they write the church a check, and put it in the collection plate every Sunday. That means they pay taxes on that distribution before giving it to the church. However, you can send money directly from your IRA to the church (or charity) of your choice, and then you won’t have to pay taxes on that income. That’s a huge benefit! Most churches are aware of this, and they should be talking to their parishioners about the advantages of this technique. 

Another tax strategy that I want to hit on (and it’s my favorite) is that there is a 0% long-term capital gains bracket. In 2022, there’s a zero percent rate that applies for individual taxpayers with taxable income up to $41,675 and for married people filing jointly, up to $83,350. Those numbers were a bit different for 2021, but it’s crucial to answer the questions of where your money is coming from and where it should be coming from. Because if you have after-tax money in a joint account, trust account, or bank account with your Social Security, you should be in that zero-percent capital gains rate. It’s something that many people assume should be 15% or 20%. But it’s zero for some folks. Osiwala Financial Group brings our CPA into discussions like these because staying informed is critical to monetary growth. 

Tax planning must be a multiyear, forward-looking process and not solely concentrating on where you’ll be for 2022. If your CPA and Financial Advisor are not talking about ways you may be able to save on taxes, you may be missing out on an opportunity to keep more of your money in retirement. Want to learn how you may be able to save money on your taxes? Click HERE to schedule a conversation by phone, virtually, or in-office with an Osiwala Financial Group Advisor to find out your options to ensure you’re not overpaying Uncle Sam year after year.