The Huge NYS Tax Credit Available For Donations To The SUNY Impact Foundation
There is a little-known, very lucrative New York State Tax Credit that came into existence within the past few years for individuals who wish to make charitable donations to their SUNY college of choice through the SUNY Impact Foundation. The tax credit is so large that individuals who make a $10,000 donation to the SUNY Impact Foundation can receive a dollar-for-dollar tax credit of $8,500 whether they take the standard deduction or itemize on their tax return. This results in a windfall of cash to pre-selected athletic programs and academic programs by the donor at their SUNY college of choice, with very little true out-of-pocket cost to the donors themselves once the tax credit is factored in.
There is a little-known, very lucrative New York State Tax Credit that came into existence within the past few years for individuals who wish to make charitable donations to their SUNY college of choice through the SUNY Impact Foundation. The tax credit is so large, that individuals who make a $10,000 donation to the SUNY Impact Foundation can receive a dollar-for-dollar tax credit of $8,500 whether they take the standard deduction or itemize on their tax return. This results in a windfall of cash to pre-selected athletic programs and academic programs by the donor at their SUNY college of choice, with very little true out-of-pocket cost to the donors themselves once the tax credit is factored in.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
What is the SUNY Impact Foundation Tax Credit?
The SUNY Impact Foundation Tax Credit is a generous New York State tax incentive that allows individuals to receive a large state tax credit for making a charitable donation to the SUNY Impact Foundation. This program was introduced in recent years to encourage private giving to support SUNY campuses and their programs.
Do you have to itemize deductions to receive the SUNY Impact Foundation tax credit?
No. Donors can claim the full New York State tax credit whether they itemize deductions or take the standard deduction on their tax return. This makes it a valuable opportunity for both high-income and middle-income taxpayers.
Where does the donation go?
All contributions are made through the SUNY Impact Foundation, a statewide nonprofit that supports State University of New York campuses. Donors can designate their gift to specific SUNY colleges or to particular athletic or academic programs at those institutions.
How does the SUNY Impact Foundation benefit SUNY schools?
The foundation channels private donations directly to SUNY institutions, providing extra funding for scholarships, research, athletics, and academic innovation. The tax credit encourages more private giving to supplement public funding for SUNY programs.
Is there a limit on how much you can donate?
The program is capped annually by the state, and only a limited number of donors can participate each year. Interested individuals should contact the SUNY Impact Foundation or their financial advisor early to confirm availability and eligibility.
The Trump Tax Plan for 2025: Social Security, Tips, Overtime, SALT Cap, and more….
It seems as though the likely outcome of the 2024 presidential elections will be a Trump win, and potentially full control of the Senate and House by the Republicans to complete the “full sweep”. As I write this article at 6am the day after election day, it looks like Trump will be president, the Senate will be controlled by the Republicans, and the House is too close to call. If the Republicans complete the full sweep, there is a higher probability that the tax law changes that Trump proposed on his campaign trail will be passed by Congress and signed into law as early as 2025.
It looks as though the likely outcome of the 2024 presidential election will be a Trump win, and potentially full control of the Senate and House by the Republicans to complete the “full sweep”. As I write this article at 6am the day after election day, it looks like Trump will be president, the Senate will be controlled by the Republicans, and the House is too close to call. If the Republicans complete the full sweep, there is a higher probability that the tax law changes that Trump proposed on his campaign trail will be passed by Congress and signed into law as early as 2025. Here are the main changes that Trump has proposed to the current tax laws:
Making Social Security Completely Exempt from Taxation
Exempting tips from income taxes
Exempting overtime pay from taxation
A new itemized deduction for auto loan interest
Dropping the corporate tax rate from the current 21% down to 15%
Eliminating the $10,000 SALT Cap
Extension of the Tax Cut & Jobs Act beyond 2025
Even if the Democrats end up hanging on to the House by a narrow margin, there is still a chance that some of these tax law changes could be passed in 2025.
Social Security Exempt From Taxation
This one is big for retirees. Under current tax law, 85% of Social Security retirement benefits are typically taxed at the federal level. Trump has proposed that all Social Security Benefits would be exempt from taxation, which would put a lot more money into the pocket of many retirees. For example, if a retiree receives $40,000 in social security benefits each year and they are in the 22% Fed bracket, 85% of their $40,000 is currently taxed at the Federal level ($34,000), not paying tax on their social security benefit would put $7,480 per year back in their pocket.
Note: Most states do not tax social security benefits. This would be a tax change at the federal level.
Exempting Tips from Taxation
For anyone who works in a career that receives tips, such as waiters, bartenders, hair stylists, and the list goes on, under current tax law, you are supposed to claim those tips and pay taxes on those tips. Trump has proposed making tips exempt from taxation, which for industries that receive 50% or more of their income in tips could be a huge windfall. The Trump proposed legislation would create an above-the-line deduction for all tip income, including both cash and credit card tips.
Overtime Pay Exempt From Taxation
For hourly employees who work over 40 hours per week and receive overtime pay, Trump has proposed making all overtime wages exempt from taxation, which could be a huge windfall for hourly workers. The Tax Foundation estimates that 34 million Americans receive some form of overtime pay during the year.
Auto Loan Interest Deduction
Trump has also proposed a new itemized deduction for auto loan interest. However, since it’s likely that high standard deductions will be extended beyond 2026, if there is a full Republican sweep, only about 10% of Americans would elect to itemize on their tax return as opposed to taking the standard deduction. A taxpayer would need to itemize to take advantage of this new proposed tax deduction.
Reducing The Corporate Tax Rate from 21% to 15%
Trump proposed reducing the corporate tax rate from the current 21% to 15%, but only for companies that produce goods within the United States. For these big corporations, a 6% reduction in their federal tax rates could bring a lot more money to their bottom line.
Eliminating the $10,000 SALT Cap
This would be a huge win for states like New York and California, which have both high property taxes and state income taxes. When the Tax Cut and Jobs Act was passed, it was perhaps one of the largest deductions for individuals who resided in states that had both state income tax and property taxes referred to as the SALT Cap (State and Local Taxes). Trump has proposed extending the Tax Cut and Jobs Act but eliminating the $10,000 SALT cap.
For example, if you currently live in New York and have property taxes of $10,000 and you pay state income tax of $20,000, prior to the passing of the Tax Cut and Jobs Act, you were able to itemize your tax deductions and take a $30,000 tax deduction at the federal level. When TCJA passed, it capped those deductions at $10,000, so most individuals defaulted into just taking the standard deduction and lost some of that tax benefit. Under these proposed tax law changes, taxpayers will once again be able to capture the full deduction for their state income taxes and property taxes making itemizing more appealing.
No Sunset For The Tax Cut and Jobs Act
The Tax Cut and Jobs Act was passed by Trump and the Republican Congress during his first term. That major taxation legislation was scheduled to expire on December 31, 2025, which would have automatically reverted everything back to the old tax brackets, standard deductions, loss of the QBI deduction, etc., prior to the passing of TCJA. If the Republicans gain control of the House, there is a very high probability that the tax laws associated with TCJA will be extended beyond 2025.
Summary of Proposed 2025 Tax Law Changes
There could be a tremendous number of tax law changes starting in 2025, depending on the ultimate outcome of the election results within the House of Representatives. If a full sweep takes place, a large number of the reforms that were covered in this article could be passed into the law in 2025. However, if there is a divided Congress, only a few changes may make it through Congress. We should know the outcome within the next 24 to 48 hours.
It’s also important to acknowledge that these are all proposed tax law changes. Before passing them into law, Congress could place income limitations on any number of these new tax benefits, and/or new tax law changes could be introduced. It should be a very interesting 2025 from a tax standpoint.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
What tax changes has Donald Trump proposed for 2025?
If Donald Trump returns to the presidency with Republican control of Congress, several major tax changes could be enacted in 2025. His proposals include making Social Security benefits tax-free, exempting tips and overtime pay from taxation, allowing a new deduction for auto loan interest, reducing the corporate tax rate to 15%, eliminating the $10,000 SALT cap, and extending the Tax Cuts and Jobs Act (TCJA) beyond 2025.
Will Social Security benefits become tax-free under Trump’s plan?
Yes, Trump has proposed eliminating all federal taxes on Social Security benefits. Currently, up to 85% of Social Security income is taxable for many retirees. If enacted, retirees could see thousands of dollars in annual tax savings, depending on their total income and filing status.
What does it mean that tips and overtime pay would be tax-exempt?
Under Trump’s proposal, workers in industries that receive tips—such as restaurants, salons, and hospitality—would no longer have to pay federal income tax on their tip income. In addition, overtime wages earned by hourly workers would be fully exempt from taxation, providing meaningful take-home pay increases for millions of Americans.
What is the proposed auto loan interest deduction?
Trump’s plan includes creating a new itemized deduction for interest paid on auto loans. However, since most taxpayers claim the standard deduction, only those who itemize would benefit from this new deduction.
How would the corporate tax rate change?
The proposal would lower the corporate tax rate from 21% to 15%, but only for companies that manufacture goods within the United States. The goal is to incentivize domestic production and boost U.S.-based manufacturing jobs.
What would happen to the $10,000 SALT cap?
Trump has proposed eliminating the $10,000 cap on state and local tax (SALT) deductions, which would significantly benefit taxpayers in high-tax states like New York, California, and New Jersey. Removing the cap would allow taxpayers to once again deduct their full state income and property taxes.
Will the Tax Cuts and Jobs Act be extended beyond 2025?
Yes, Trump and Republican leaders have indicated they intend to make the TCJA permanent. This would preserve lower individual tax brackets, the higher standard deduction, and the 20% qualified business income (QBI) deduction for pass-through entities.
When could these proposed tax changes take effect?
If Republicans control the presidency and both chambers of Congress, some or all of these proposals could be passed and take effect as early as the 2025 tax year. However, Congress may adjust income thresholds, introduce phaseouts, or modify the scope of these benefits before enactment.
Can You Process A Qualified Charitable Distribution (QCD) From an Inherited IRA?
Qualified Charitable Distributions are an advanced tax strategy used by individuals who are age 70½ or older who typically make annual contributions to their church, charity, or other not-for-profit organizations. QCDs allow individuals who have pre-tax IRAs to send money directly from their IRA to their charity of choice, and they avoid having to pay tax on those distributions. However, a client recently asked an excellent question:
“Can you process a qualified charitable distribution from an Inherited IRA? If yes, does that QCD also count toward the annual RMD requirement?”
Qualified Charitable Distributions are an advanced tax strategy used by individuals who are age 70½ or older who typically make annual contributions to their church, charity, or other not-for-profit organizations. QCDs allow individuals who have pre-tax IRAs to send money directly from their IRA to their charity of choice, and they avoid having to pay tax on those distributions. However, a client recently asked an excellent question:
“Can you process a qualified charitable distribution from an Inherited IRA? If yes, does that QCD also count toward the annual RMD requirement?”
QCD from an Inherited IRA
The short answer to both of those questions is “Yes”. As long as the owner of the Inherited IRA account is age 70½ or older, they would have the option to process a QCD from their inherited IRA, and that QCD amount would count towards the annual required minimum distribution (RMD) if one is required.
What is a QCD?
When you process distributions from a Traditional IRA account, in most cases, those distributions are taxed to the account owner as ordinary income. However, once an individual reaches the age of 70½, a new distribution option becomes available called a “QCD” or a qualified charitable distribution. This allows the owner of the IRA to issue a distribution directly to their church or charity of choice, and they do not have to pay tax on the distribution.
Backdoor Way To Recapture Tax Deduction for Charitable Contribution
Due to the changes in the tax laws, about 90% of the taxpayers in the U.S. elect to take the standard deduction when they file their taxes, as opposed to itemizing. Since charitable contributions are an itemized deduction, that means that 90% of taxpayers no longer receive a tax benefit for their charitable contributions throughout the year.
A backdoor way to recapture that tax benefit is by making a QCD from a Traditional IRA or Inherited Traditional IRA, because the taxpayer can now avoid paying income tax on a pre-tax retirement account by directing those distributions to a church or charity. So, in a way, they are recapturing the tax benefits associated with making a charitable contribution, and they do not have to itemize on their tax return to do it.
QCD Limitations
There are three main limitations associated with processing qualified charitable distributions:
The first rule that was already mentioned multiple times is that the individual processing the QCD must be 70½ or older. For individuals turning 70½ this year, a very important note, you cannot process the QCD until you have actually turned 70½ to the DAY. I have seen individuals make the mistake of processing a QCD in the year that they turn 70½ but before the exact day that they reached age 70½. In those cases, the distribution no longer qualifies as a QCD.
Example: Jen turned 70 in February 2024, and she wants to make a QCD from her Inherited IRA. Jen would have to wait until August 2024, when she officially reaches age 70½, to process the QCD. If she attempts to process the QCD before she turns 70½, the full amount of the IRA distribution will be taxable to Jen.
QCD $100,000 Annual Limit
Each taxpayer is limited to a total of $100,000 in QCDs in any given tax year, so the dollar limit each year is relatively high. That full $100,000 could be remitted to a single charity or it could be split up among any number of charities.
QCD’s Can Only Be Processed From IRAs
If you inherit a pre-tax 401(k) account, you would not be able to process a QCD directly from the 401(K) plan. 401(k) accounts are not eligible for QCDs. You would first have to rollover the balance in the 401(K) to an Inherited IRA, and then process the QCD from there.
QCDs Count Toward the RMD Requirement
If you have inherited a retirement account, you may or may not be subject to the new 10-year rule and/or required to take annual RMDs (required minimum distributions) for your inherited IRA each year. For purposes of this article, if you subject to the annual RMD requirement, these QCD count toward the annual RMD amount.
Example: Tom has an inherited IRA and he is subject to the new 10-year rule and is also required to distribute annual RMD’s from the IRA during the 10 year period. If the RMD amount of 2025 is $5,000, assuming that Tom has reached age 70½, he would be eligible to process an QCD for the full amount of the RMD, he will be deemed as satisfying the annual RMD requirement, and does not have to pay tax on the $5,000 distribution that was directed to charity.
This is also true for 10-year rule distributions. If someone gets to the end of the 10-year period, there is $60,000 remaining in the inherited IRA, and the account owner is age 70½ or older, they could process a QCD for all or a portion of that remaining balance and avoid having to pay tax on any amount that was directed to a charity or not-for-profit.
QCD Distributions Must Be Sent Directly To Church or Charity
One of the important rules with processing these QCDs is the owner of the Inherited IRA can never come into contact with the money. The distribution has to be sent directly from the IRA custodian to the church or charity.
For our clients, a common situation is sending money directly to their church as opposed to putting money in the offering plate each Sunday. If they estimate that they donate about $4,000 to their church throughout the year, in January, they request that we process a QCD from their inherited IRA to their church in the amount of $4,000 and that amount is a non-taxable distribution from their IRA.
When the distribution is requested, we have to ask the client how to make the check payable and the mailing address of the church, and then our custodian (Fidelity) processes the check directly from their IRA to the church.
No Special Tax Code on 1099-R for QCDs
Anytime you process a distribution from an inherited IRA, the custodian of the IRA will issue you a 1099-R tax form at the end of the year so you can report the distribution amount on your tax return. With QCD, there is not a special tax code indicating that it was a QCD. If you use an accountant to prepare your taxes, you must let them know about the QCD, so they do not report the distribution as taxable income to you.
Summary
For individuals who inherit Traditional IRAs and have charitable intent, processing Qualified Charitable Distributions each year can be an excellent way to recapture the tax deduction that is being lost for their charitable contributions while at the same time counting toward the annual RMD requirement for that tax year.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
Can you make a Qualified Charitable Distribution (QCD) from an inherited IRA?
Yes. If the owner of the inherited IRA is age 70½ or older, they can make Qualified Charitable Distributions (QCDs) directly from their inherited IRA. These distributions can also count toward satisfying their annual Required Minimum Distribution (RMD).
What is a Qualified Charitable Distribution (QCD)?
A QCD allows individuals age 70½ or older to transfer funds directly from their Traditional IRA to a qualified charity without paying federal income tax on the distribution. It’s a tax-efficient way to give to charity while reducing taxable income.
Do QCDs count toward required minimum distributions (RMDs)?
Yes. If you are required to take RMDs from your IRA or inherited IRA, the amount of any QCDs you make during the year will count toward satisfying your RMD obligation for that year.
Can you process a QCD from a 401(k)?
No. QCDs can only be made from IRA accounts, including inherited IRAs. If you inherit a 401(k), you must first roll it over into an inherited IRA before making a Qualified Charitable Distribution.
What is the annual limit for QCDs?
Each taxpayer can make up to $100,000 in Qualified Charitable Distributions per year. Married couples filing jointly can each contribute up to $100,000 from their respective IRAs.
What age must you be to make a QCD?
You must be at least 70½ years old to the day before making a Qualified Charitable Distribution. If the QCD is processed before you reach 70½, the entire amount will be treated as a taxable distribution.
Do you get a tax deduction for a QCD?
No separate deduction is taken, but the QCD amount is excluded from taxable income. This provides a “backdoor” tax benefit for charitable giving, especially for those who take the standard deduction and do not itemize.
How must QCD funds be sent to the charity?
The funds must go directly from the IRA custodian to the charity. The account owner cannot receive the money first. For example, if donating to a church, the custodian issues the check directly payable to the church, not the IRA owner.
How are QCDs reported on tax forms?
The IRA custodian will issue a Form 1099-R showing the distribution, but it will not be coded as a QCD. It’s important to inform your tax preparer that the distribution was a QCD so it isn’t mistakenly reported as taxable income.
Why use QCDs from inherited IRAs?
QCDs from inherited IRAs allow charitably minded individuals to reduce taxable income while meeting RMD requirements. It’s especially useful for retirees and beneficiaries who no longer itemize deductions but still make annual charitable donations.
Should You Surrender Your Life Insurance Policies When You Retire?
Squarespace Excerpt: As individuals approach retirement, they often begin reviewing their annual expenses, looking for ways to trim unnecessary expenses so their retirement savings last as long as possible now that their paychecks are about to stop for their working years. A common question that comes up during these client meetings is “Should I get rid of my life insurance policy now that I will be retiring?”
As individuals approach retirement, they often begin reviewing their annual expenses, looking for ways to trim unnecessary expenses so their retirement savings last as long as possible now that their paychecks are about to stop for their working years. A common question that comes up during these client meetings is “Should I get rid of my life insurance policy now that I will be retiring?”
Very often, the answer is “Yes, you should surrender your life insurance policy”, because by the time individuals reach retirement, their mortgage is paid off, kids are through college and out of the house, they have no debt outside of maybe a car loan, and they have accumulated large sums in their retirement accounts. So, what is the need for life insurance?
However, for some individuals, the answer is “No, you should keep your life insurance policies in force,” and we will review several of those scenarios in this article as well.
Retirees That Should Surrender Their Life Insurance Policies
Since this is the more common scenario, we will start with the situations where it may make sense to surrender your life insurance policies when you retire.
Remember Why You Have Life Insurance In The First Place
Let’s start off with the most basic reason why individuals have life insurance to begin with. Life insurance is a financial safety net that protects you and your family against the risk if you unexpectedly pass away before you're able to accumulate enough assets to support you and your family for the rest of their lives, there is a big insurance policy that pays out to provide your family with the financial support that they need to sustain their standard of living.
Once you have paid off mortgages, the kids are out of the house, and you have accumulated enough wealth in investment accounts to support you, your spouse, and any dependents for the rest of their lives, there is very little need for life insurance.
For example, if we have a married couple, both age 67, who want to retire this year and they have accumulated $800,000 in their 401(K) accounts, we can show them via retirement projections that, based on their estimated expenses in retirement, the $800,000 in their 401(K) accounts in addition to their social security benefits is more than enough to sustain their expenses until age 95. So, why would they need to keep paying into their life insurance policies when they are essentially self-insured. If something happens to one of the spouses, there may be enough assets to provide support for the surviving spouse for the rest of their life. So again, instead of paying $3,000 per year for a life insurance policy that they no longer need, why not surrender the policy, and spend the money on more travel, gifts for the kids, or just maintain a larger retirement nest egg to better hedge against inflation over time?
It's simple. If there is no longer a financial need for life insurance protection, why are you continuing to pay for financial protection that you don’t need? There are a lot of retirees that fall into this category.
Individuals That Should KEEP Their Life Insurance Policies in Retirement
So, who are the individuals who should keep their life insurance policies after they retire? They fall into a few categories.
#1: Still Have A Mortgage or Debt
If a married couple is about to retire and they still have a mortgage or debt, it may make sense to continue to sustain their life insurance policies until the mortgage and/or debt have been satisfied, because if something happens to one of the spouses and they lose one of the social security benefits or part-time retirement income, it could put the surviving spouse in a difficult financial situation without a life insurance policy to pay off the mortgage.
#2: Single Life Pension Election
If an individual has a pension, when they retire, they have to elect a survivor benefit for their pension. If they elect a single life with no survivor benefit and that pension is a large portion of the household income and that spouse passes away, that pension would just stop, so a life insurance policy may be needed to protect against that pension spouse passing away unexpectedly.
#3: Estate Tax Liability
Uber wealthy individuals who pass away with over $13,990,000 in assets may have to pay estate tax at the federal level. Knowing they are going to have an estate tax liability, oftentimes these individuals will purchase a whole life insurance policy and place it in an ILIT (Irrevocable Life Insurance Trust) to remove it from their estate, but the policy will pay the estate tax liability on behalf of the beneficiaries of the estate.
#4: Tax-Free Inheritance
Some individuals will buy a whole life insurance policy so they have an inheritance asset earmarked for their children or heirs. The plan is to maintain that policy forever, and after the second spouse passes, the kids receive their inheritance in the form of a tax-free life insurance payout. This one can be a wishy-washy reason to maintain an insurance policy in retirement, because you have to pay into the insurance policy for a long time, and if you run an apple-to-apple comparison of accumulating the inheritance in a life insurance policy versus accumulating all of the life insurance premium dollars in another type of account, like a brokerage account, sometimes the latter is the more advantageous way to go.
#5: Illiquid Asset Within the Estate
An individual may have ownership in a privately held business or investment real estate which, if they were to pass away, the estate may have expenses that need to be paid. Or, if a business owner has two kids, and one child inherits the business, they may want a life insurance policy to be the inheritance asset for the child not receiving ownership in the family business. In these illiquid estate situations, the individual may maintain a life insurance policy to provide liquidity to the estate for any number of reasons.
#6: Poor Health Status
The final reason to potentially keep your life insurance in retirement is for individuals who are in poor health. Sometimes an individual is forced into retirement due to a health issue. Until that health issue is resolved, it probably makes sense to keep the life insurance policy in force. Even though they may no longer “need” that insurance policy to support a spouse or dependents, it may be a prudent investment decision to keep that policy in force if the individual has a shortened life expectancy and the policy may pay out within the next 10 years.
While “keeping” the life insurance policy in retirement is less commonly the optimal solution, there are situations like the ones listed above, where keeping the policy makes sense.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
Should you keep or surrender your life insurance policy when you retire?
The answer depends on your financial situation. Most retirees who have paid off their mortgage, have no debt, and have sufficient assets to support themselves and their spouse no longer need life insurance for protection. In those cases, surrendering the policy can free up cash for travel, family, or other retirement goals.
When does it make sense to surrender life insurance in retirement?
If your financial plan shows that your retirement savings, pensions, and Social Security benefits are enough to meet your lifetime expenses, you’re effectively “self-insured.” Continuing to pay premiums on a policy you no longer need may not make financial sense. The savings from surrendering the policy can help stretch your retirement dollars.
Who should keep life insurance after retirement?
Some retirees should maintain coverage, including those who still have a mortgage or debt, those who elected a single-life pension with no survivor benefit, and individuals with high net worth who expect to owe estate taxes.
How can life insurance help if you have a pension?
If your pension ends when you pass away and your spouse depends on that income, life insurance can replace the lost income. This is especially important if you chose a “single life” pension option without survivor benefits.
Can life insurance be used for estate planning?
Yes. Wealthy individuals may use life insurance inside an irrevocable life insurance trust (ILIT) to pay future estate tax liabilities, ensuring heirs receive their inheritance without having to sell estate assets.
Is life insurance useful for leaving an inheritance?
Some retirees keep a whole life policy as a tax-free inheritance for their children. However, it’s wise to compare the long-term return of keeping the policy versus investing those premiums in a brokerage account, as alternative strategies may provide greater value.
What if your estate includes a business or real estate?
If your estate includes illiquid assets—like a business or property—life insurance can provide cash to cover estate expenses, taxes, or to equalize inheritance among heirs (for instance, when one child inherits a business and another does not).
Should retirees in poor health keep their life insurance?
Yes, possibly. If a retiree is in poor health and expects a shorter life expectancy, maintaining an existing policy can make sense. The death benefit could pay out soon, offering a strong return on the premiums.
Should You Lease or Buy A Car: Interview with a CFP® and Owner of a Car Dealership
When clients are looking to purchase a new car one of the most common questions that we receive is “Should I Buy or Lease?” To get the answer, we interviewed a Certified Financial Planner and the owner of Rensselaer Honda to educate our audience on the pros and cons of buying vs leasing.
When clients are looking to purchase a new car one of the most common questions that we receive is “Should I Buy or Lease?” To get the answer, we interviewed a Certified Financial Planner and the owner of Rensselaer Honda to educate our audience on the pros and cons of buying vs leasing.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
Should I buy or lease my next car?
Whether you should buy or lease depends on your financial goals, driving habits, and how long you plan to keep the vehicle. Buying is generally better for long-term ownership, while leasing can make sense if you prefer lower monthly payments and like driving a new car every few years.
What are the advantages of buying a car?
Buying a car allows you to build equity and eventually drive payment-free once the loan is paid off. You have no mileage restrictions, can customize the vehicle, and can sell or trade it whenever you choose. Over time, purchasing is typically more cost-effective than leasing.
What are the downsides of buying?
The main drawback is higher upfront costs and larger monthly payments compared to leasing. You’re also responsible for the car’s depreciation, which can reduce resale value if you trade it in after only a few years.
What are the benefits of leasing a car?
Leasing generally provides lower monthly payments, minimal upfront costs, and the ability to drive a new car every two to three years. Lease agreements often include warranty coverage, which reduces maintenance costs during the lease term.
What are the disadvantages of leasing?
Leasing comes with mileage limits—usually 10,000 to 15,000 miles per year—and penalties for excess wear and tear. You don’t build equity in the vehicle, and at the end of the lease, you must either return it or start a new lease. Over many years, leasing repeatedly can cost more than buying.
Who should consider leasing?
Leasing may be ideal for individuals who prefer driving newer cars with the latest features, don’t drive long distances, and want predictable monthly costs without worrying about long-term maintenance.
Who should consider buying?
Buying is best for people who plan to keep their vehicles for many years, drive more than the average mileage, or want to eventually own a car outright without ongoing payments.
What financial factors should I consider before deciding?
Compare the total cost of ownership over the time you expect to use the car, including monthly payments, insurance, maintenance, taxes, and resale or lease-end fees. A financial planner or dealership finance manager can help run the numbers based on your budget and driving habits.
How to Title Your House To Avoid Probate
When we are working with clients on their estate plan, one of the primary objectives is to assist them with titling their assets so they avoid the probate process after they pass away. For anyone that has had to serve as the executor of an estate, you have probably had firsthand experience of how much of a headache the probate processes which is why it's typically a goal of an estate plan to avoid the probate process altogether.
When we are working with clients on their estate plan, one of the primary objectives is to assist them in titling their assets so they avoid the probate process after they pass away. For anyone that has had to serve as the executor of an estate, you have probably had firsthand experience with how much of a headache the probate process is. For that reason, it's typically a goal of an estate plan to avoid the probate process altogether.
While it’s fairly easy to protect an IRA, a brokerage account, bank accounts, and life insurance policies from the probate process, it has historically been more difficult to protect the primary residence from the probate process without setting up a trust to own the house.
But there is good news on this front, especially for residents of New York State. As of July 2024, New York allows residence to add a Transfer on Death (TOD) designation to their deed. Adding a TOD designation is like naming beneficiaries on an IRA account or brokerage account. Prior to July 2024, residents of New York State were not allowed to add a TOD designation to a deed for real estate, so their only ways to protect their house from the probate process was:
Gift the house to their child before they die (Not a good option)
Gift the house with a life estate (Ok….but not great)
Set up either a Revocable or Irrevocable Trust to own the house
Those three options are still available but now there is a fourth option which is simple and costs less money than setting up a trust. Change the deed on your house to a “TOD deed”.
32 States Now Allow TOD Deeds
While New York just made this option available in 2024, there were already 31 other states that already allowed residents to add a TOD designation to their deed. Depending on which state you live in, a simple Google search or contacting a local estate attorney, will help you determine if your state offers the TOD deed option.
What Is The Probate Process?
Why is it a common goal of an estate plan to have your assets avoid the probate process? The probate process can be expensive and time consuming depending on what state you live in. In New York, the state that we are located in, it’s a headache. Any asset that is not owned by a trust or does not have beneficiaries directly assigned to it, pass to your beneficiaries through your will. The process of moving assets from your name (the decedent) to the beneficiaries of your estate, it a formal legal process called the “probate process”.
It is not as easy as when someone passes away with a house, they just look at their will which list their children as beneficiaries of their estate, and then the ownership of the house is transferred to the kids the next day. The probate process is a formal legal process in which the court system is involved, an estate attorney may need to be hired to help the executor through the probate process, an accountant may need to be hired to file an estate tax return, an appraiser may need to be hired to value real estate holdings, and investment advisors may be involved to help retitle assets to the beneficiaries. All of this costs money and takes time to navigate the process. We have seen some estates take years to settle before the beneficiaries receive their inheritance.
How Assets Pass to Beneficiaries of an Estate
There are three ways that assets pass to a beneficiary of an estate:
Probate
By Contract
By Trust
Assets That Pass By Contract
Assets that pass “by contract” to beneficiaries of an estate avoid the probate process because there are beneficiaries contractually designated on those accounts. Examples of these types of assets are retirement accounts, IRAs, annuities, life insurance policies, and an asset with a TOD designation like a brokerage account, bank account, or a house with a TOD deed. For these types of assets, you simply look at the beneficiary form that was completed by the account owner, and that's who the account passes to immediately after the decedent passes away. It does NOT pass by the decedent’s will.
Example: Someone could list their two children as 50/50 beneficiaries of their estate in their will but if they list their cousin as their 100% primary beneficiary on their IRA, when they pass away, that IRA balance will go 100% to their cousin because IRA assets transfer by contract and not through the probate process. Any assets that go through the probate process are distributed in accordance with a person’s will.
Asset That Pass By Trust
One of the primary reasons for an individual to set up either a revocable trust or irrevocable trust to own their house or other assets is to avoid the probate process, because assets that are owned by a trust pass directly to the beneficiaries listed in the trust document outside of the will. Example: your brokerage account is owned by your Revocable Trust, when you pass away, the assets can be immediately distributed to the beneficiaries listed in the trust document without going through the probate process. The beneficiaries listed in your trust document may or may not be different than the beneficiaries listed in your will.
House With A Transfer of Death Deed
Prior to New York allowing residents to attach a TOD designation to the deed on their house, the only options for titling the house to avoid the probate process were to:
Gift the house to the kids before they pass (not a good option)
Gifting the house with a life estate
Setting up a trust to own the house
The most common solution was setting up a trust to own the house which costs money because you typically have to engage an estate attorney to draft the trust document. If the ONLY objective of establishing the trust was for the house to avoid probate, the new TOD deed option could replace that option and be an easier, more cost-effective option going forward.
How To Change The Deed to a TOD Deed
Changing the deed on your house to a TOD deed is very simple. You just need to file the appropriate form at your County Clerk’s Office. The TOD designation on your house does not become official until it has been formally filed with the County Clerk’s Office.
What If You Still Have A Mortgage?
Having a mortgage against your primary residence should not preclude you from changing your current deed to a TOD deed. Even after you file the TOD deed, you still own the house, the bank still maintains a lien against your house for the outstanding amount, and even if you pass and the house transfers to the kids via the TOD designation, it does not remove the lien that the bank has against the property. If the kids tried to sell the house after you pass, they would first need to satisfy the outstanding mortgage, potentially with proceeds from the sale of the house.
The TOD Deed Does Not Protect The House From Medicaid
While changing the deed on your house to a TOD deed will successfully help the house to avoid the probate process, it does not protect the house from a future long-term care event. While the primary residence is not a countable asset for Medicaid, Medicaid, depending on the county that you live in, could put a lien against your house for the amount that they paid to the nursing home for your long-term care. Individuals that want to fully protect their house from a future long-term care event will often set up an Irrevocable Trust, otherwise known as a Medicaid Trust, to own their house to avoid these Medicaid liens. That is an entirely different but important topic that we have a separate article on. If you are looking for more information on how to protect your house from probate AND a long-term care event, here are our articles on those topics:
Article: Gifting Your House with a Life Estate vs Medicaid Trust
Article: Don’t Gift Your House To Your Children!!
Article: How to Protect Assets From A Nursing Home
Changing the House TOD Beneficiaries
The question frequently comes up during our estate planning meetings, “What if I change my mind on who I want listed as the beneficiary of my house?” With a TOD Deed, it’s an easy change. You just go back to the County Clerks Office and file a new TOD Deed with your updated beneficiary designations. Remember, once you Change the deed to a TOD deed, the house no longer passes in accordance with your will, it passes by contract to the beneficiaries list on that TOD designation.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
What is a Transfer on Death (TOD) deed?
A Transfer on Death (TOD) deed allows you to name beneficiaries who will automatically inherit your home when you pass away—without having to go through probate. It works similarly to naming beneficiaries on an IRA, bank, or brokerage account.
Does New York State allow TOD deeds?
Yes. As of July 2024, New York residents can add a TOD designation to their property deed. Before this change, homeowners in New York had to use trusts or life estates to avoid probate. New York now joins 31 other states that already allow TOD deeds.
Why should I want to avoid probate?
The probate process can be costly and time-consuming. It often requires attorneys, accountants, and court filings before beneficiaries can receive their inheritance. In some cases, estates can take years to settle. A TOD deed allows real estate to transfer immediately to beneficiaries, avoiding this process entirely.
How do assets pass to beneficiaries?
Assets can pass three ways: through probate (by will), by contract (through named beneficiaries), or by trust. TOD deeds fall under the “by contract” category, which means the property goes directly to the listed beneficiaries without court involvement.
How is a TOD deed different from a trust?
A TOD deed is simpler and less expensive to set up than a trust. It only applies to real estate, while a trust can manage multiple types of assets. For homeowners who only want to avoid probate on their house, a TOD deed may be an easier solution than creating a trust.
How do you file a TOD deed in New York?
You must complete and file the appropriate form with your County Clerk’s Office. The TOD designation is not valid until it has been officially recorded by the county. Once filed, your home will automatically transfer to the listed beneficiaries when you pass away.
Can you still file a TOD deed if you have a mortgage?
Yes. Having a mortgage doesn’t prevent you from using a TOD deed. The bank’s lien on the property remains in place, and your beneficiaries will need to pay off or refinance the loan if they sell or keep the property after your death.
Does a TOD deed protect your home from Medicaid?
No. A TOD deed only avoids probate—it does not protect the property from potential Medicaid liens for long-term care expenses. Homeowners concerned about Medicaid recovery typically use an Irrevocable (Medicaid) Trust instead.
Can you change TOD deed beneficiaries later?
Yes. You can change beneficiaries at any time by filing a new TOD deed with your County Clerk’s Office. The most recently filed TOD deed overrides all prior versions.
What Is A Donor Advised Fund and How Do They Work for Charitable Contributions?
Due to changes in the tax laws, fewer individuals are now able to capture a tax deduction for their charitable contributions. In an effort to recapture the tax deduction, more individuals are setting up Donor Advised Funds at Fidelity and Vanguard to take full advantage of the tax deduction associated with giving to a charity, church, college, or other not-for-profit organizations.
Due to changes in the tax laws, fewer individuals are now able to capture a tax deduction for their charitable contributions. In an effort to recapture the tax deduction, more individuals are setting up Donor Advised Funds at Fidelity and Vanguard to take full advantage of the tax deduction associated with giving to charity, church, college, or other not-for-profit organizations.
In this article, we will review:
The reason why most taxpayers can no longer deduct charitable contributions
What is a Donor Advised Fund?
How do Donor Advised Funds operate?
Gifting appreciated securities to Donor Advised Funds
How are Donor Advised Funds invested?
How to set up a self-directed Donor Advised Fund
The Problem: No Tax Deductions For Charitable Contributions
When the Tax Cut and Jobs Act was passed in 2017, it greatly limited the number of taxpayers that were able to claim a tax deduction for their charitable contributions. Primarily because in order to claim a tax deduction for charitable contributions, you have to itemize when you file your taxes because charitable contributions are an itemized deduction.
When you file your taxes, you have to choose whether to elect the standard deduction or to itemize. The Tax Cut & Jobs Act greatly increased the amount of the standard deduction, while at the same time it capped two of the largest itemized tax deductions for taxpayers - which is state income tax paid and property taxes. SALT (state and local taxes) are now capped at $10,000 per year if you itemize.
In 2025, the standard deduction for single filers is $15,000 and $30,000 for married filing joint, which means if you are a married filer, and you want to deduct your charitable contributions, assuming you reach the SALT cap at $10,000 for state income and property taxes, you would need another $20,000 in tax deductions before your reached that amount of the standard deduction. That’s a big number to hurdle for most taxpayers.
Example: Joe and Sarah file a joint tax return. They pay state income tax of $8,000 and property taxes of $6,000. They donate $5,000 to their church and a variety of charities throughout the year. They can elect to take the standard deduction of $30,000, or they could itemize. However, if they itemize while their state income tax and property taxes total $14,000, they are capped at $10,000 and the only other tax deduction that they could itemize is their $5,000 to church and charity which brings them to a total of $15,000. Since the standard deduction is $14,000 higher than if they itemized, they would forgo being able to deduct those charitable contributions, and just elect that standard deduction.
How many taxpayers fall into the standard deduction category? According to the Tax Policy Center, in 2020, about 90% of taxpayers claimed the standard deduction. Prior to the passing of the Tax Cut and Jobs Act, only about 70% of taxpayers claimed the standard deduction meaning that more taxpayers were able to itemize and capture the tax deduction for their charitable contributions.
What Is A Donor Advised Fund
For individuals that typically take the standard deduction, but would like to regain the tax deduction for their charitable contributions, establishing a Donor Advised Fund may be a solution.
A Donor Advised Fund looks a lot like a self-directed investment account. You can make contributions to your donor advisor fund, you can request distributions to be made to your charities of choice, and you can direct the investments within your account. But the account is maintained and operated by a not-for-profit organization, a 501(c)(3), that serves as the “sponsoring organization”. Two of the most recognized providers within the Donor Advised Fund space are Fidelity and Vanguard.
Both Fidelity and Vanguard have their own Donor Advised Fund program. These large investment providers have established a not-for-profit arm for the sole purpose of allowing investors to establish, operate, and invest their Donor Advised Account for their charitable giving.
Why Do People Contribute To A Donor Advised Fund?
We just answered the “What” question, now we will address the “Why” question. Why do people contribute to these special investment accounts at Fidelity and Vanguard and what is it about these accounts that allow taxpayers to capture the tax deduction for their charitable giving that was previously lost?
The short answer - it allows taxpayers that give to charity each year, to make a large lump sum contribution to an investment account designated for their charitable giving. That then allows them to itemize when they file their taxes and capture the deduction for their charitable contributions in future years.
Here’s How It Works
As an example, Tim and Linda typically give $5,000 per year to their church and charities throughout the year. Since they don’t have any other meaningful tax deductions outside of their property taxes and state income taxes that are capped at $10,000, they take the $30,000 standard deduction when they file their taxes, and do not receive any additional tax deductions for their $5,000 in charitable contributions, because they did not itemize.
Instead, Tim and Linda establish a Donor Advised Fund at Fidelity, and fund it with a one-time $50,000 contribution. Since they made that contribution to a Donor Advised Fund which qualifies as an IRS approved charitable organization, the year that they made the $50,000 contribution, they will elect to itemize when they file their taxes and they’ll be able to capture the full $50,000 tax deduction, since that amount is well over the $30,000 standard deductions.
But the $50,000 that was contributed to their Donor Advised Fund does not have to be distributed to charities all in that year. Each Donor Advised Program has different minimum annual charitable distribution requirements, but at the Fidelity program it’s just $50 per year. In other words, taxpayers that make these contributions to the Donor Advised Fund can capture the full tax benefit in the year they make the contributions, but that account can then be used to fund charitable contribution for many years into the future, they just have to distribute at least $50 per year to charity.
It gets better, Tim and Linda then get to choose how they want to invest their Donor Advised Fund, and they select a 60% stock / 40% bond portfolio. So not only are they able to give from the $50,000 that they contributed, but all of the investment returns continue to accumulate in that account that Tim and Linda will never pay tax on, that they can then use for additional charitable giving in the future.
How Do Donor Advised Funds Operate?
The example that I just walked you through laid the groundwork for how these Donor Advised Fund to operate, but I want to dive a little bit deeper into some features that are important with these types of accounts.
Funding Minimums
All Donor Advised Funds operate differently depending on the provider. One example is the minimum funding requirement to open a Donor Advised Fund. The Fidelity program does not have an investment minimum, so they can be opened with any amount. However, the Vanguard program currently has a $20,000 investment minimum.
Fees Charged By Donor Advised Sponsor
Both Vanguard and Fidelity assess an annual “administration fee” against the assets held within their Donor Advised Fund program. This is how the platform is compensated for maintaining the not-for-profit entity, processing contributions and distributions, investment services, issuing statements, trade confirmations, and other administrative responsibilities. At the time that I’m writing this article, both the Fidelity and Vanguard program charge an administrative fee of approximately 0.60% per year.
How Charitable Distributions Are Made From Donor Advised Funds
Once the Donor Advised Account is funded, owners are able to either login online to their account and request money to be sent directly to their charity of choice, or they can call the sponsor of the program and provide payment instructions over the phone.
For example, if you wanted to send $1,000 to the Red Cross, you would log in to your Donor Advised account and request that $1,000 be sent directly from your Donor Advised account to the charity. You never come into contact with the funds. The charitable distributions are made directly from your account to the charity.
When you login to their online portals, they have a long list of pre-approved not-for-profit organizations that have been already established on their platform, but you are able to give to charities that are not on that pre-approved list. A common example is a church or a local not-for-profit organization. You can still direct charitable contributions to those organizations, but you would need to provide the platform with the information that they need to issue the payment to the not-for-profit organization not on their pre-approved list.
Annual Grant Requirement
As I mentioned earlier, different donor advised programs have different requirements as to how much you are required to disperse from your account each year and some platforms only require a disbursement every couple of years. For example, the Vanguard program only requires that a $500 charitable distribution be made once every three years, but they do not require an annual distribution to be made.
Irrevocable Contributions
It’s important to understand that contributions made to Donor Advised Funds are irrevocable, meaning they cannot be reversed. Once the money is in your Donor Advised Account, you cannot ask for that money back. The platform just gives you “control” over the investment allocation, and how and to who the funds are disbursed to for your charitable giving.
What Happens To The Balance In The Donor Advised Fund After The Owner Passes Away?
Since some of our clients have substantial balances in these Donor Advised Funds, we had to ask the question, “What happens to the remaining balance in the account after the owner of the account passes away?”. Again, the answer can vary from platform to platform, but most platforms offer a few options.
Option 1: The owner of the account can designate any number of charities as final beneficiaries of the account balance after they pass away, and then the full account balance is distributed to those charities after they pass.
Option 2: The owner can name one or more successor owners for the account that will take over control of the account and the charitable giving after the original owner passes away. As planners, we then asked the additional question, “What if they have multiple children, and each child has different charitable preferences?”. The response from Vanguard was that the Donor Advisor Fund can be split into separate Donor Advised accounts controlled by each child, Then, each child can dictate how the funds in their account are distributed to charity.
Gifting Cash or Appreciated Securities
There are two main funding options when making contributions to a Donor Advised Fund. You can make a cash contribution or you can fund it by transferring securities from a brokerage account. Funding with cash is easy and straightforward. When you establish your Donor Advised Fund, you can set up bank instructions to attach your checking account to their Donor Advised Fund for purposes of making contributions to the account. There are limits on the tax deductions for cash contributions in a given year. For cash contributions, donors can receive a tax deduction up to 60% of their AGI for the year.
Funding the donor advised fund with appreciated securities from your taxable brokerage account has additional tax benefits. First, you receive the tax deduction for making the charitable contribution just like it was made in cash, but, if you transfer a stock or security directly from your taxable brokerage account to the Donor Advised Fund, the owner of the brokerage account avoids having to pay tax on the unrealized capital gains built up in that security.
For example, Sue bought $10,000 of Apple stock 10 years ago and it’s now worth $50,000. If she sells the stock, she will have to pay long term capital gains taxes on the $40,000 gain in that holding. If instead, she sets up a Donor Advised Fund and transfers the $50,000 in Apple stock directly from her brokerage account to her Donor Advised account at Fidelity, she may receive a tax deduction for the full $50,000 fair market value of the stock and avoids having to pay tax on the unrealized capital gain.
An important note regarding the deduction limits for gifting appreciated securities - the tax deduction is limited to 30% of the taxpayers AGI for the year. Example, if Sue has an AGI of $100,000 for 2025 and wants to fund her Donor Advised Fund with her appreciated stock, the most she can take a deduction for in 2025 is $30,000. ($100,000 AGI x 30% limit).
As you can see, transferring appreciated stock to a Donor Advised Fund can be beneficial, but cash offers a higher threshold for the tax deduction in a single year.
Donor Advised Funds Do Not Make Sense For Everyone
While establishing and funding a Donor Advised Fund may be a viable solution for many taxpayers, it’s definitely not for everyone. In short, your annual charitable contributions have to be large enough for this strategy to make sense.
First example, if you are contributing approximately $2,000 per year to charity, and you don’t intend on making bigger contributions to charities in the future, it may not make sense to contribute $40,000 to a Donor Advised Fund. Remember, the whole idea is you have to make a large enough one-time contribution to hurdle the standard deduction limit for itemizing to make sense. You also have to itemize to capture the tax deduction for your charitable contributions.
If you are a single filer, you don’t have any tax deductions, and you make a $5,000 contribution to a Donor Advised Fund - that is still below the $15,000 standard deduction amount. In this case, you are not realizing the tax benefit of making that contribution to the Donor Advised Fund. If instead, you made a $30,000 contribution as a single filer, now it may make sense.
Second example, not enough taxable income. For our clients that are retired, many of them are showing very little income (on purpose). If we have a client that is only showing $50,000 for their AGI, the tax deduction for their cash contributions would be limited to $30,000 (60% of AGI) and gift appreciated securities would be limited to $15,000 (30% of AGI). Unless they have other itemized deductions, that may not warrant making a contribution to a Donor Advised Fund because they are right there at the Standard Deduction amount. PLUS, they are already in a really low tax bracket, so they don’t really need the deduction.
This Strategy is Frequently Used When A Client Sells Their Business
Our clients commonly use this Donor Advised Fund strategy during abnormally large income years. The most common is when a client sells their business. They may realize a few million dollars in income from the sale of their business in a single year, and if they have some form of charitable intent either now or in the future, they may be able to fund a Donor Advised Fund with $100,000+ in cash or appreciated securities. This takes income off the table at potentially the highest tax brackets and they now have an account that is invested and growing that will fund their charitable gifts for the rest of their life.
How to Set-up A Donor Advised Fund
Setting up a Donor Advised Fund is very easy. Here are the links to the Fidelity and Vanguard Platforms for their Donor Advised Fund solutions:
Fidelity Donor Advised Fund Link: Fidelity Charitable Fund Link
Vanguard Donor Advised Fund Link: Vanguard Charitable Fund Link
Disclosure: We want to provide the links as a convenience to our readers, but it does not represent an endorsement of either platform. Investors should seek guidance from their financial professionals.
These Donor Advised Funds for the most part are self-directed platforms which allow you to select the appropriate investment allocation from their investment menu when you set up your account.
Contact Us With Questions if you have any questions on the Donor Advised Fund tax strategy, please feel free to reach out to us.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
Why can fewer taxpayers deduct charitable contributions now?
After the 2017 Tax Cuts and Jobs Act (TCJA), the standard deduction nearly doubled and capped state and local tax (SALT) deductions at $10,000. Because of this, most taxpayers now take the standard deduction instead of itemizing, which means they can’t deduct charitable donations.
What is a Donor Advised Fund (DAF)?
A Donor Advised Fund is a charitable investment account that allows you to make a large, tax-deductible contribution in one year, invest the funds for potential growth, and distribute money to charities over time. Providers like Fidelity and Vanguard operate these programs through nonprofit foundations.
How does a Donor Advised Fund help restore the tax deduction for charitable giving?
By making a single large contribution to a DAF, donors can exceed the standard deduction threshold and itemize on their tax return in that year. The donor then uses the fund to make charitable gifts gradually over future years, even though they already received the full tax deduction upfront.
Can you fund a Donor Advised Fund with appreciated stock?
Yes. You can contribute appreciated securities instead of cash. This approach allows you to receive a tax deduction for the full fair market value of the stock while also avoiding capital gains taxes on the appreciation.
What are the tax deduction limits for contributions?
Cash contributions to a DAF are deductible up to 60% of your adjusted gross income (AGI), while appreciated securities are deductible up to 30% of AGI. Any excess contributions can be carried forward for up to five years.
When does a Donor Advised Fund make sense?
DAFs make the most sense for individuals with large charitable intent who want to bunch multiple years of giving into one tax year—often after a major income event like selling a business or receiving a large bonus.
What Vehicle Expenses Can Self-Employed Individuals Deduct?
Self-employed individuals have a lot of options when it comes to deducting expenses for their vehicle to offset income from the business. In this video we are going to review:
1) What vehicle expenses can be deducted: Mileage, insurance, payments, registration, etc.
2) Business Use Percentage
3) Buying vs Leasing a Car Deduction Options
4) Mileage Deduction Calculation
5) How Depreciation and Bonus Depreciation Works
6) Depreciation recapture tax trap
7) Can you buy a Ferreri through the business and deduct it? (luxury cars)
8) Tax impact if you get into an accident and total the vehicle
Self-employed individuals have a lot of options when it comes to deducting expenses for their vehicle to offset income from the business. In this video we are going to review:
What vehicle expenses can be deducted: Mileage, insurance, payments, registration, etc.
Business Use Percentage
Buying vs Leasing a Car Deduction Options
Mileage Deduction Calculation
How Depreciation and Bonus Depreciation Works
Depreciation recapture tax trap
Can you buy a Ferreri through the business and deduct it? (luxury cars)
Tax impact if you get into an accident and total the vehicle
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Frequently Asked Questions (FAQs):
What vehicle expenses can self-employed individuals deduct?
Self-employed individuals can generally deduct expenses related to the business use of their vehicle, including gas, insurance, registration, maintenance, repairs, lease payments, and loan interest. You can use either the standard mileage method or the actual expense method—but not both for the same vehicle in a given year.
How do you calculate the business-use percentage?
If your car is used for both personal and business purposes, only the business portion is deductible. To determine your business-use percentage, divide your business miles by your total annual miles. For example, if you drove 20,000 miles during the year and 12,000 were for business, you can deduct 60% of eligible expenses.
Is it better to buy or lease a car for business?
Both options can be tax-efficient. Lease payments are deductible based on the business-use percentage, but leased cars don’t qualify for depreciation. Purchased vehicles allow you to claim depreciation (including bonus depreciation and Section 179 deductions), but you can’t deduct the full purchase price in one year unless it qualifies for special rules.
How does the mileage deduction work?
For 2025, the IRS standard mileage rate is set annually (e.g., 67 cents per mile in 2024). Simply multiply your total business miles by that rate. This rate includes depreciation, gas, maintenance, and insurance, so you can’t deduct those costs separately if you use this method.
How does vehicle depreciation work—and what’s bonus depreciation?
If you purchase a vehicle, you can depreciate the business-use portion of its cost over several years. Heavy vehicles (over 6,000 pounds) may qualify for accelerated write-offs, including 80% bonus depreciation in 2025 or full expensing under Section 179 up to certain limits. However, “luxury” cars like Ferraris or Lamborghinis are subject to strict IRS caps that limit the deduction.
What happens if the vehicle is sold or totaled?
If you sell or total a business vehicle that has been depreciated, you may owe “depreciation recapture” tax on the portion of depreciation claimed. Essentially, you pay ordinary income tax on the amount of depreciation you previously deducted, up to your gain on the sale or insurance payout.
