With all the commotion of tariffs, wars, judicial objections, and economic policy changes, you would think that the financial planning world would be busy adjusting strategies, see-sawing like mad, and hanging on to every word of possible policy changes. But ironically, it’s pretty boring right now. There is always a lot of posturing while bills are voted on, but until then, we don’t get too excited.
It may be the calm before the storm, as the “One Big Beautiful Bill Act” could set the wheels in motion for many changes and adjustments in the future. As I write this, the Senate is in a vote-a-rama, meaning it is anyone’s guess what amendments will be proposed to the bill. We should know more in the next week or two. In the meantime, there are some tried-and-true planning techniques that are always worth keeping in the back of your mind.
Qualified Charitable Distributions (QCDs): A QCD is a direct distribution from your tax-deferred individual retirement account (IRA) to a qualified charity. In 2025, you can distribute up to $108,000 from your IRA without the distribution counting as ordinary income. QCDs count towards your annual Required Minimum Distribution (RMD) for those 73 or older. Anyone aged 70 ½ or older with an IRA, SEP IRA, or Simple IRA can participate. This is a very tax-efficient way to make charitable contributions.
Gifting Stock and Other Non-Cash Assets: Gifting stock, mutual funds, or even real estate directly to a charity can also be tax-efficient. By donating long-term capital appreciated assets, you are eligible for a tax deduction for the full fair market value of the asset but, avoid realizing the capital gains tax on the appreciation. For those not old enough to qualify for a QCD or those wanting to make larger gifts, this is also a good option.
Donor Advised Funds (DAFs): A DAF is a simple, tax-advantaged account for charitable giving. Donors contribute cash, securities, or other appreciated assets into a sponsoring organization DAF account. You are eligible for a tax deduction in the current year, but are given flexibility on when and how much is distributed to the charities of your choice. The portion of your contribution that is not distributed is invested, allowing for future tax-free growth.
Bundling assets into one larger contribution allows you to take an itemized deduction on your tax return in the current year. You can carry forward any unused portion for five years. In addition, by donating long-term, low-cost basis assets with significant appreciation to your DAF, you avoid capital gains (see Gifting Stock above).
Naming Charitable Beneficiaries on Your Qualified Accounts: If your estate plan includes gifting to charities, and you have qualified accounts (IRAs, 401(k)s, 403(b)s, etc.), you can name the charity as the full or partial beneficiary of your qualified account. Neither your estate nor your heirs will pay income taxes on the distribution of those assets. Since charities do not pay income tax on the proceeds, the full amount of your qualified accounts will directly benefit the charity of your choice. When you name individuals as beneficiaries, they are subject to RMD rules, and distributions count as ordinary taxable income, so this is a way to get money out of your retirement accounts tax-free.
As always, we’re happy to discuss your financial plans and develop customized strategies to determine what makes the most sense. There will be plenty of excitement and fine-tuning in the back half of the year, assuming new tax legislation is passed.
For more information contact us via our website or call (585) 381-4180. Also, check out our Investing 101 video series on Armbruster Capital Management’s YouTube channel for additional information on charitable gifting options, IRMAA, Avoiding RMD penalties, and more.
*This article was written on June 30, 2025*