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January Quarterly Newsletter - 2022

Highlights of this Newsletter:

  • Tax Topics to Discuss With Your CPA

  • How Safe is Your Password?

  • Charitable Giving Can Be A Family Affair

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Tax Topics to Discuss with Your CPA

Charitable Gifts

Did you make any charitable gifts in 2021? If so, discuss with your CPA specifically what type of gift

was made.

  • Gifts of cash are treated differently than gifts of appreciated stock. Cash gifts up to 60% of your Adjusted Gross Income (AGI) can be deducted, while a deduction of long-term capital gain property is limited to 30% of AGI. If you are not itemizing your deductions, there may still be an opportunity to deduct a portion of your cash gifts (up to $300 for single filers and $600 for married filing jointly).

  • Was your gift given out of your IRA? Taxpayers over the age of 70 ½ are allowed to exclude from taxable income (not deduct) $100,000 worth of gifts given directly to charity that otherwise would have been claimed as income. This is commonly referred to as a Qualified Charitable Deduction (QCD). This will NOT be apparent on the 1099 that you receive at the end of the year. Year-end 1099s will show total withdrawals from your IRA and will not explicitly state that part or all of this distribution was sent to a charity.

  • The Cares Act opens up an opportunity to deduct up to 100% of AGI if certain criteria is met.

It is possible to have both charitable itemized deductions and a QCD in any given year (subject

to AGI limitations).

Roth IRA conversions

• If you converted pre-tax IRA dollars (money you put into an IRA at some point and received an

income deduction for the contribution), the conversion of these dollars to a Roth IRA will be taxable.

• If you converted post-tax IRA dollars (commonly known as a “back-door Roth conversion” wherein you did not receive a deduction for your IRA contribution), your conversion will not be subject to income tax if you have no other pre-tax dollars in an IRA. Employer sponsored 401(k) plans and the like do not count. NOTE: Pending legislation may do away with the “back-door Roth

conversion” in 2022.

529 contributions

Depending on your state of domicile, you may be entitled to a state tax credit for contributions made; therefore, let your tax preparer know if you made a contribution to any 529 plan.

Charitable Giving Can Be a Family Affair

As families grow in size and overall wealth, a desire to "give back" often becomes a priority. Cultivating philanthropic values can help foster responsibility and a sense of purpose among both young and old alike, while providing financial benefits. Charitable donations may be eligible for income tax deductions (if you itemize) and can help reduce capital gains and estate taxes. Here are four ways to incorporate charitable giving into your family's overall financial plan.

Annual Family Giving

The holidays present a perfect opportunity to help family members develop a giving mindset. To establish an annual family giving plan, first determine the total amount that you'd like to donate as a family to charity. Next, encourage all family members to research and make a case for their favorite nonprofit organization, or divide the total amount equally among your family members and have each person donate to his or her favorite cause.

When choosing a charity, consider how efficiently the contribution dollars are used — i.e., how much of the organization's total annual budget directly supports programs and services versus overhead, administration, and marketing. For help in evaluating charities, visit the Charity Navigator web site,, where you'll find star ratings and more detailed financial and operational information.

Snapshot of 2020 Giving

Despite the pandemic and economic downturn, 2020 was the highest year for charitable giving on record, reaching $471.44 billion. Giving to public-society benefit organizations, environmental and animal organizations, and human services organizations grew the most, while giving to arts, culture, and humanities and to health organizations declined.

Estate Planning

Charitable giving can also play a key role in an estate plan by helping to ensure that your philanthropic wishes are carried out and potentially reducing your estate tax burden.

The federal government taxes wealth transfers both during your lifetime and at death. In 2021, the federal gift and estate tax is imposed on lifetime transfers exceeding $11,700,000, at a top rate of 40%. States may also impose taxes but at much lower thresholds than the federal government.

Ways to incorporate charitable giving into your estate plan include will and trust bequests; beneficiary designations for insurance policies and retirement plan accounts; and charitable lead and charitable remainder trusts. (Trusts incur upfront costs and often have ongoing administrative fees. The use of trusts involves complex tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax professionals before implementing such strategies.)

Donor-Advised Funds

Donor-advised funds offer a way to receive tax benefits now and make charitable

gifts later. A donor-advised fund is an

agreement between a donor and a host organization (the fund). Your contributions are generally tax deductible, but the organization becomes the legal owner of the assets. You (or a designee, such as a family member) then advise on how those contributions will be invested and how grants will be distributed. (Although the fund has ultimate control over the assets, the

donor's wishes are generally honored.)

Family Foundations

Private family foundations are similar to donor-advised funds, but on a more complex scale. Although you don't necessarily need the coffers of Melinda Gates or Sam Walton to establish and maintain one, a private family foundation may be most appropriate if you have a significant level of wealth. The primary benefit (in addition to potential tax savings) is that you and your family have complete discretion over how the money is invested and which charities will receive grants. A drawback is that these separate legal entities are subject to stringent


These are just a few of the ways families can nurture a philanthropic legacy while benefitting their financial situation. For more information, contact your financial professional or an estate planning attorney.

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