Episode Transcript
Jackie Griggs: So it allows you to donate more than if you had just said, “I'm gonna give $5,000 in cash.” If instead you put the $5,000 in cash into an investment and that grew over time and became $7,000, you could donate the $7,000. So you're giving more to that cause you care about, as well as by donating, you have the potential to avoid paying the capital gains taxes on that growth.
Welcome to Finance for Physicians, the show where we help physicians like you use money as a tool to live a great life. I'm your host, Daniel Wrenne, and I've spent the last decade advising physicians on their personal finances with the mission to help them understand that taking control of their finances now means creating a future where they can practice medicine where, when, and how long they want to.
Daniel Wrenne: Jackie, how's it going?
Jackie Griggs: Hey, Daniel. How are you?
Daniel Wrenne: I'm doing good. We're excited to talk about some charitable giving strategies today, which is always a fun topic. It's a dually fun topic. I guess it's always a good thing to give, but there's also some really nice tax benefits that come with it, right? And I guess when we're gonna release this show, it'll be getting around the season of the holidays too. So I think that's probably the time of the year when people most often think about giving. And so we're gonna talk through some of those strategies, how you might work that into the equation for your planning.
The key is that we don't want to give just for the tax benefits, but we wanna make sure you guys are aware of some of these tax strategies that are a lot of times overlooked.
That's really the goal. We wanna make sure you're able to fully utilize a lot of these tax strategies if you're already gonna be giving—everybody wants to lower taxes, right? Have you ever talked to anybody that doesn't wanna lower taxes?
Jackie Griggs: That's rare.
Daniel Wrenne: Rare. Rare. Right. Yeah. As long as we're working within the law of the IRS. Anyway. And then there's also some new tax laws coming out coming into effect next year, which changed the game a little bit.
So we're gonna go get into that as well. I always, I'm gonna start abbreviating this. It's the OBVA tax scheme—starts next year, so that changes the game a little bit. Yeah. Jackie, thanks for joining me. Jackie is our investment lead and also one of our financial planners here, so are you ready to jump into it?
Jackie Griggs: I am. Yeah. Excited.
Daniel Wrenne: Yeah, so I think we see a lot situations where we're working with physician families one-on-one.
And a lot of them are wanting to be generous or are actively giving. But what's pretty common is we see that they're leaving some of these tax benefits on the table.
Jackie Griggs: Right.
Daniel Wrenne: They're missing out on certain things. So ideally you're doing both. You're strategic about the giving and given to the causes you care most about, and coming up with a system to do that. But then also you're helping to minimize the tax at the same time. So what are some of the most important things for physicians to think about, especially like this time of year, strategically about charitable giving?
As we get closer to the end of the year, should we give as much as possible before the end of the year just 'cause the taxes are changing or maybe not. Let's take a minute to look at the situation.
Jackie Griggs: Yeah. Yeah. It's a common time of year, as you've already mentioned, for people to really be starting to think about giving, and there are some ways, as we think of financial planning as a whole, where we may want to really fit giving into an overall strategy.
So to circle back to one thing you said, should we be giving as much as possible? Because things are changing. Generally we try to encourage people. We don't want to necessarily let the tax tail wag the giving dog, so to speak. We don't wanna let these small tax efficiencies are changes to be changing our value system or our overall planning strategies, but there definitely are sometimes if giving is already something that we value and that we want to do, where it makes it a good time for us to start thinking about how can we optimize, how can we be as strategic as possible here?
So as we're approaching the end of the year, it may not hurt to maybe sit down and take a broad view of your finances and think, was this a year where my income is especially high?
Is this a year where I maybe have recognize some large capital gains, and so therefore I'm looking for some other tax efficiencies. And I also want to give or value that as part of my value system as well. Large business or property sale, things like that that may be generating an abnormally high tax year.
Could be a year where we also want to just think how can we be a little bit more strategic with how we plan for things like giving in order to maybe try to offset some of that additional tax burden if we're having that there. So I think as well as considering what our income and our gains that we've recognized for the year may look like.
It's also important to start thinking ahead before the end of the year here about, will I maybe be itemizing? Will I be taking the standard deduction and just starting to get a little bit strategic about maybe what my tax picture is going to look like when comes this spring and I'm filing.
Daniel Wrenne: Yeah, and I think the big first step there to think about and may hopefully a lot of you guys listening and have already done this or thought about it, is first step is what are your giving goals?
Like how much would you like to give ideally for sure for this year? But really you want to think about it like, how much do I expect to be giving into the foreseeable future?
Is it gonna be that amount this year, what's it gonna be next year? What's it gonna be? It's hard to go too far out, especially for like dollar amounts, but maybe you're saying like 10%, 15% of my income is my giving goal. That's a good starting point.
Jackie Griggs: Yeah. Good to be intentional always.
Daniel Wrenne: And then we know or you guys know what you're working with. And so Jackie was hitting on, like there are cases where it could be beneficial to accelerate. ‘Cause giving is one of the things—we'll talk about the strategies that kind of the tools I guess that you can use to help actually execute on this—but giving is one of those things where you can really you have control over what you end up getting taxed.
Like you can shift basically income into one year or the other. And there could be a case where you would want to accelerate your giving into the—or before the end of the year.
Jackie Griggs: Yeah.
Daniel Wrenne: But it's a very personalized, I mean, each individual circumstance is different. We gotta throw out the “consult your accountant” and you gotta always consult your accountant. Of course. Get their input.
Let's talk about the different ways of giving because there's a bunch of different—there's not a bunch. There's a handful of different methods of… You got this—Everybody knows. I'll start with the simple, straightforward one. You got cash donations, which are simple. You just take cash from your account and give it to a charitable organization.
Jackie Griggs: Very straightforward, but it's not all we can do.
Daniel Wrenne: Yeah. Simple, straightforward. And I guess you could give like property or give stuff to Goodwill or whatever. We're not gonna really get into that. But cash donations, super straightforward. And then you start to get into other things. And Jackie, you want to explain appreciated assets?
Jackie Griggs: Sure. Yeah, absolutely. So kind of like what Daniel mentioned, the really the simplest method of giving would just be to be giving cash to that organization or that cause that you care about supporting.
Another way we can really go about doing that is actually by donating assets that have appreciated. So typically that would be stocks, bonds, ETFs, things like that, that you could invest in that then grow over time.
A reason why that can be a little bit more favorable is because when you donate that appreciated asset, it's valued at what's called the fair market value, which is whatever it is in that moment when you donate it. So it's at that appreciated value as opposed to the basis of what you put in that then grew to be this higher fair market value.
So it allows you to donate more than if you had just said, I'm gonna give $5,000 in cash. If instead you put the $5,000 in cash into an investment and that grew over time and became $7,000. You could donate the $7,000. So you're giving more to that cause you care about, as well as by donating that, you have the potential to avoid paying the capital gains taxes on that growth.
So that's just one of those other opportunities that we have to optimize and play that tax game a little bit more when we have giving goals in the picture that we can help plan for.
Daniel Wrenne: Yeah. The way I like to look at it is if I have a stock that I own, most people listening own stock in some capacity.
Like whether it's through an ETF or whatever. Or a stock, let's just say you have Apple stock. Let's keep it simple. So let's say I own a bunch of Apple stock and over the years I've paid for it, I paid a thousand dollars for it, but let's say it's worth $10,000 just 'cause it's grown. And you look at your stock account balance and you see $10,000, well, really it's not actually $10,000 to you because in order to get it, you have to sell it, which triggers tax on the growth, which is $9,000 in that example. So you put in a thousand, it's worth $10,000.
So that means it went up $9,000. So that means there's $9,000 of growth. So if you have a $10,000 stock like that, in that example, you have to sell it to use it. So therefore you have to trigger the $9,000 of gain, which triggers tax on the $9,000. So it's really—it depends on your situation, but let's just say on average it's 20% tax on that.
Jackie Griggs: Yeah.
Daniel Wrenne: So what's 20% on $9000? That's $1,800 tax. So it's really like you don't have $10,000, you really have $8,200. It’s the way I look at it on like a balance sheet. So yeah, if you have a $10,000 Apple stock, it's really more like net of tax worth, like $8,200 just because we know it would have to get sold and trigger tax in order to actually do anything for you. So I think that's important to understand that because what's key with this whole donating appreciated assets strategy is it allows you to take this asset that's worth $8,200 in this example, and give it like at its full value at $10,000.
Jackie Griggs: Yeah. So you're able to give that full amount to the cause you care about, and you avoid that tax bill for yourself.
Daniel Wrenne: So if you have $10,000 sitting in your checking account, you're like, “ I want to give $10,000 to this organization.” And then you got $10,000 sitting in that stock account and you're like, “Which one do I do?”
And what you could do is you say, “Why don't we just give the stock because it's really kinda only worth $8,200 to me? Let's give the stock and then I'll just buy the stock again with my $10,000 cash.”
Jackie Griggs: Yeah. So you kind of replenish that and kinda get the best of both worlds there.
Daniel Wrenne: Right. So it's if you have stock or investments that have appreciated that are held not in retirement accounts. It's typically a really good strategy to look at when your alternative is giving cash.
Jackie Griggs: Yeah, absolutely.
Daniel Wrenne: Now the problem is I know I give a lot to our church, and I know they're gonna be like, “We're not taking your stock.” Or they're like, “What do you mean stock?”
They would not accept my stock.
Jackie Griggs: Yeah. Sometimes there, there needs to be a different workaround than just sending shares about to causes.
AD BREAK
Daniel Wrenne: Let's take a quick break to talk about our firm, Wrenne Financial Planning.
The goal of our podcast is to empower you to make better financial decisions, but sometimes the best financial decision you can make is to work with someone who understands your financial goals and has the expertise to keep you on track to reach them. That's where Wrenne Financial Planning comes in. We are a full-service financial planning firm that works with over 400 physicians and their families across the country.
We charge a transparent monthly flat fee for our services and offer virtual meetings you can take from anywhere. Best of all, you'll get to work with a team that specializes in working with physician families. So whether you're starting out and wondering how you'll balance your student loan payments and saving for a home, or you are established physician trying to figure out how to pay for your kids' college and how much you need to save to reach financial freedom, we can help.
I'll put a link in the show notes to schedule a no-obligation meeting with one of our certified financial planners. Wrenne Financial Planning, LLC is a registered investment advisor. For more information about our firm, please visit wrennefinancial.com. That's W-R-E-N-N-E financial.com.
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Daniel Wrenne: That leads to our next point.
Jackie Griggs: Yeah, so I think really where sometimes we can bridge the gap there is by using what's called a donor-advised fund, which is something that a lot of people who have these given goals will use as a vehicle to assist with that transition from the stock to the cash.
The donor-advised fund, how that works is when you open one up for yourself for your giving goals, what you can do is you can transfer those appreciated assets from, say, your brokerage account or whatever account here we're using, where we have that growth in our stock that we're trying to get rid of the gains on.
You can transfer those appreciated shares over into the donor-advised fund. Whereas when that transfer occurs, that's what allows you to reap those tax benefits and be able to avoid those gains. And then once in the donor-advised fund, that will convert to cash that then you can use to write checks or distribute to those causes that you care about.
Daniel Wrenne: Yeah, so the donor-advised fund works well in helping just to facilitate giving securities.
But it also can facilitate if you're not, let's say you want to give 10% of your income, but you don't really know where yet, or you're kinda like, “I'm not sure.”
So you can let it build up in the donor-advised fund. Yeah. And you still get to take the tax, you get the tax benefits of giving as soon as you put it in the account, but you still maintain the ability to direct where it goes in the donor-advised fund.
Jackie Griggs: Yeah. You're able to complete that gift the moment you transfer those shares.
So if I transferred some shares into a donor-advised fund from my brokerage today, that would be a gift on my 2025 taxes, and that would apply for this year. Even if I don't know yet where I want to give or what causes or what amounts I'm going to give from it, I could make that decision down the road.
I can make that decision next year or in future years. However the gift is complete when I move those shares today. And then I have the flexibility and control to distribute that over time.
Daniel Wrenne: Yeah. So maybe we should talk about, we talked about the tax benefits of this appreciated stock scenario.
But maybe we should talk about what actually are the tax benefits of the gift itself?
Jackie Griggs: Sure. Yeah that's a good question.
Daniel Wrenne: Because for the appreciated security example, there's two big tax benefits. There's the ability to give depreciated security without triggering tax on the gains.
In that scenario I was just talking about with the $10,000, you get to take the growth of that off your balance sheet without triggering tax. But then there's a secondary benefit sometimes, a lot of times, which is deductions itemized.
Jackie Griggs: Yeah. The actual deduction itself if you're itemizing on your taxes.
Daniel Wrenne: Yeah. And I guess we'll wait to talk about the 2026 variation of that, maybe, but maybe we can talk about how it's working now, I guess for starters.
Jackie Griggs: Yeah, spoiler alert, there's some 2026 changes we'll need to talk about here in this episode. But at least for right now, there's a few different tax rules and tax treatments on the different types of deductions, or sorry, on the different types of donations that we should be aware of as we're planning for what deductions we want to make in a year. So with cash donations, that first example where we just said, I have $10,000 of cash I want to give to a cause.
You can deduct that cash given if you're itemizing up to a limit of I believe it's 60% of your adjusted gross income. So pretty high limit there that you can offset with that cash donation. Whereas on the other hand, the appreciated assets that we've been talking about a little bit more due to some of those efficiencies are a 30% AGI limit for what you can deduct there if you're itemizing.
So a little bit lower limit than outright cash, but again, as we've talked about, there are some additional benefits to doing that with the capital gains tax that you'll be avoiding there.
Daniel Wrenne: What about with donor-advised funds?
Jackie Griggs: Yeah, that's a great question. 'Cause those ones are a little bit funky in a way.
Though we really think of those as donating appreciated securities, which would fall under that 30% AGI limit. They actually, following the IRS rules, that counts more like a cash donation. So that actually falls under the 60% AGI rule. So it gives us a little bit of a higher giving limit there as well, which is nice.
Daniel Wrenne: Yeah, hopefully. I don't know. I wonder how many people are listening and are like hitting those caps. Hopefully, there's a fair amount, but it's always good to talk to your accountant about this sort of strategy, especially if you're getting aggressive with putting or batching a bunch in one year.
Or if you're hitting, getting close to those limits. 'cause that would be frustrating to realize you exceeded the cap.
Jackie Griggs: Yeah. Yeah, definitely good to be planning and I think part of why we just encourage people to be intentional with their goals and strategy.
But I think what you mentioned there might also be a good opportunity for us to talk about what you mean by that batching together, what that means for someone.
Daniel Wrenne: Yeah. So well, okay, so we'll definitely get into that, but just to make sure we're clear, so we got the ability to deduct it on your tax return as a itemized deduction.
And that depends on your circumstances. Hopefully, you're hitting—if you're giving quite a bit, you're probably gonna be itemizing, which means you're getting like dollar-for-dollar benefits on additional giving where it reduces taxes as you give more. So that's the first kind of tax benefit is potentially in increasing your itemized deductions. And then the second benefit is that the scenarios we were just talking about with being able to give appreciated securities. The last thing before we get into the batch giving, the QCD scenario, we almost forgot. That’s for all you 70-and-a-half-plus year olds listening or—you're younger—your parents or grandparents.
Jackie Griggs: Yeah. Yeah. I'm glad you brought that up. 'cause that's one we don't see quite as often, but is still a very valuable strategy for people in that position. So how a QCD works—it's a qualified charitable distribution when you are over that age 70 and a half, you can give up to a hundred thousand dollars per year directly from your IRA to a charity.
So a big benefit of that is if we're in a position where we would have to be taking RMDs out of our IRA in retirement, or we're taking that out in order to live on that, we could instead use that to send that straight to the charity of our choosing or that cause we care about to meet some of our giving goals while also avoiding having that be income that could hit our tax return.
So instead of having—we have these pre-tax dollars in an IRA. And when we take that out, we would then have to pay taxes on that as if it is income to us, which would leave us with a lot less to be able to give than if that was the direction we wanted to go with it. So here it allows you to really meet that distribution while also meeting your giving goals and avoiding that income coming to your tax return.
So really good strategy if you're in that situation.
Daniel Wrenne: Yeah, so if you're 70 and a half and older and you have IRAs, which a lot of you would at that age, it looks like it's actually 108 per—my Google AI is saying 108 per individual and 216 if both spouses are eligible for QCD, like that's the cap on how much you can do, but that's typically a better strategy than taking the deduction on your tax return. It's more often the better strategy, but you gotta look at your individual circumstances to see for sure. But definitely something to keep in mind. Okay. On to batching contributions.
This is where we get really strategic here.
Jackie Griggs: Yeah. I think this is a good one because this is a way where you can really get strategic, like you mentioned, in order to have some extra efficiency in years where that could be beneficial. So when we talk about batching contributions or bunching contributions, really what we mean by that is accelerating how much we're giving in one year instead of spreading that evenly across multiple years.
For an example, I guess just to put some numbers to it, if we say that the standard deduction for someone who's single is, it's around $16,000—$16,100 for next year. If say that was me and I wanted to give $20,000 every year to charity, if I wasn't going to bunch that giving, I could give $40,000 over two years—20,000 in this year, 20,000 in the next year, and have a benefit of $7,800 above that standard deduction amount over those two years.
Otherwise, what I could do is I could give $40,000 all in one year to my donor-advised fund, and then take the $16,100 standard deduction in the next year. So the tax benefit that way would be around $23,000 as opposed to $7,800 just by bunching that together and accelerating more of that into a single year, and then following that up by taking the standard deduction instead of giving an amount such that we're just getting a little bit over the standard deduction. Two years.
Daniel Wrenne: Yeah. And then it can also affect, if you're a business owner, it can affect things like the business deduction, the QBI business deduction you get, it can swing that up or down. So I've seen situations where that's an additional benefit to batching giving in one year or not. So that's a kind of a cool strategy to look at. It's very dependent on circumstances.
Jackie Griggs: Yeah. There's no one way across the board to apply that, but for those to whom it does apply, it could be a very good strategic lever to pull in certain years.
Daniel Wrenne: Yep. Okay, what about the new stuff coming in 2026? Because just we've gone over all this stuff, but just to make things simpler, not simpler, more complicated. There's a new couple new, they're not massive changes, but they're, one's a good thing. One's a bad thing in relation to giving.
Jackie Griggs: Yeah. Yeah. I know we've teased it a little bit throughout this episode that there are some changes coming up, so we'll touch on some of them briefly here and maybe discuss a little bit how that could impact people. But one of the changes we have coming up here in the OBBBA is non itemizers are now going to be able to deduct a thousand dollars if they are filing a single or $2,000 if they are married, filing jointly in cash gifts.
Whereas previously this was something that was for itemizers. So this does open the door a little bit for a different subset of the tax population to be able to have a tax benefit from giving.
Daniel Wrenne: Yeah, so if you're in residency or something, and that'd probably be. Or you just don't have substantial giving. You're gonna still be able to get the benefits of the donation up to that thousand or $2000 levels.
Jackie Griggs: So that's good. That's opening up the door for more people to give.
I think what you alluded to on the bad side here of changes is that for our itemizers, there's actually now going to be a floor. Below this floor, you really won't get a tax benefit from that gift. So the floor is set to be 0.5 of your adjusted gross income. So below 0.5 of AGI, you won't be receiving a tax benefit for that giving.
However, there will still be a benefit above that floor.
So there are a couple of changes here on the horizon for 2026 that we wanna be planning for as well from the new bill.
Daniel Wrenne: Yeah, so if I'm listening, and I'm hearing these, I'm like where do I start? There's a lot of stuff like, what's a good starting point?
Jackie Griggs: As always, it's great to start potentially with your team if you have one, talking to your financial planners, your CPA.
Anyone who may be assisting you in how to be strategic around your finances, always a great start. If you're doing it on your own, you could explore if you have a brokerage account or somewhere that you hold, things like appreciated stock, you could potentially call up the custodian of that account.
So wherever it's held, be that Schwab or Fidelity or Vanguard, and see if they allow for opening a donor-advised fund and see how you would potentially go about setting that up if that's something you are interested in. But I would say really the biggest thing before getting into any of those weeds or logistics there would be to really think about your own values and your own goals around giving and thinking about really what is it that you want to accomplish, and how much of that do you want to be doing?
Then you can really work on some of those other dominoes about the logistics of how you would figure that out.
Daniel Wrenne: Yeah, so definitely if you're working with our team, reach out. Now's the time of year if we haven't established a plan already, get that in place. We're happy to help. And if you're listening and you have questions around this, we're happy to go into more depth. We just hit the high points of a lot of these things for today. But, yeah, the main thing is coming up with a plan and making sure you're taking advantage of some of these things based on your circumstances. So Jackie, as always, it's been fun. Thanks for joining me to talk a little giving and tax.
Jackie Griggs: Thanks for having me again.
No guests or clients appearing on the podcast received any form of compensation for their appearance and obtained no other benefit from us. It should not be assumed that every client has had the same experience.
