QCD’S: TAX PLANNING STRATEGY WORTH YOUR WHILE

Five Things You Should Know

1. Equity Markets – moved lower this week with U.S. stocks (S&P 500) down -2.48% and international stocks (EAFE) falling -1.23%   
2. Fixed Income Markets – rose this week with investment-grade bonds (AGG) up 0.61% while high yield bonds (JNK) rose 0.54%
3. GDP Growth – Data released this week showed that U.S. gross domestic product rose by an annualized 4.9% in the third quarter and above expectations. Contributions from increasing consumer spending, inventories, exports, residential investment, and government spending were enough to outweigh higher interest rates and inflationary pressures. 
4. Yield Swings – Bond yield volatility continued this week with yields on 10-year Treasuries briefly touching 5% for the first time in 16 years. Prominent bond bears, including Bill Ackman and Bill Gross, have said the bond rout has gone too far and they are due to reverse course amid rising global risks.
5. KEY INSIGHT: [VIDEO & ARTICLE] This week, Dave and Jon discuss how charitably inclined individuals can give assets away that make sense for their financial plan and reduce taxable liability.

QCD’s: Tax planning strategy worth your while

Starting at age 73, the IRS mandates IRA owners to take annual income withdrawals, known as Required Minimum Distributions (“RMDs”). This creates unexpected ordinary income if you aren’t taking traditional IRA distributions by age 73. This may cause unintended tax consequences related to, but not limited to, 1) federal income tax, 2) state income tax, 3) Medicare part B (or “IRMAA”), or 4) net investment income tax.

Charitably minded individuals and couples at age 70.5 and older have a tax-smart strategy called a qualified charitable distribution (“QCDs”), also known as a charitable IRA rollover.  The QCD allows a donor to instruct an IRA administrator to send up to $100,000 per year—all or part of the annual RMD—to one or more qualifying charities, excluding donor-advised funds. The IRA assets go directly to charity, so donors don’t report QCDs as taxable income and don’t owe any taxes on the QCDs, even if they do not itemize deductions. As noted in the example in the video, QCDs can reduce AGI and taxable income, which can reduce some or all of the tax consequences listed above.

Start creating a tax planning strategy by considering these five bullet points:

• How are RMDs impacting my future financial plans?
• Am I giving regularly to organizations I care about (i.e., monthly, quarterly, etc.)?
• How am I currently giving to organizations I care about?
• Do I want to leave a lasting legacy philanthropically?
• Does my current tax strategy still make sense?

These are all good questions to consider, and we at Ten Capital are happy to discuss them with you further.

If you would like more information on this topic, feel free to visit this link.

Jon Heideman, CPA/PFS CFP® and the Ten Capital Team

Data, Just the Data

• U.S. Jobless Claims – rose by 10,000 to 210,000 on the week ending October 20^th. This was above market expectations of 208,000 and remained relatively close to the nine-month low from the previous week. 

• U.S. Composite PMI – rose to 51.0 in October 2023, up from September’s 50.2. This signaled an acceleration in private sector output expansion and marked the fastest expansion since July, supported by a quicker rate of expansion in both services and manufacturing activities. 

• U.S. MBA Mortgage Applications – fell by 1% on the week ending October 20^th, which extended the sixth-month-high decline of 6.9% from the previous week. 

• Eurozone Consumer Confidence – edged lower 0.1 points from the previous month to -17.9 in October 2023. This was the lowest in seven months compared with market expectations of -18.3. 

• Eurozone Composite PMI – dropped to 46.5 in October 2023, from September’s 47.2 and falling below market consensus of 47.4. The latest reading signaled the fifth consecutive month of falling business activity.