Following on the theme of bunching deductions, a donor-advised fund allows clients to bunch charitable contributons, noted Rowling.
The tax benefits of a donor-advised fund are enhanced by the ability to donate appreciated shares of securities and receive a deduction for the full value of the shares.
“A client can contribute a large amount to a donor-advised fund one year in which they get to write off the entire amount, then they can pull from that pool of money to make charitable contributions in subsequent years,” Rowling said.
Be aware of other tax-saving strategies.
Advisors should always keep in mind that their clients can donate to an IRA, SEP or other retirement plan or plan a Roth conversion with their tax liabilities in mind.
“I think a Roth conversion still makes sense, but it depends on the taxpayer’s bracket,” said Rowling. “If they’re in a lower, variable bracket, it might make sense to do Roth conversions or take distributions in order to use up whatever gap there is between their current income and the top of the bracket. For those in fairly high tax brackets, there’s little room to try to accelerate withdrawals and conversions.”