MML #053: The Tax Planning Move Your CPA Might Not Have Mentioned

Now that we're into 2026, you're probably thinking about last year's taxes—waiting for that email to hit your inbox from your CPA welcoming you to another year of document gathering. 

Or maybe you’re trying to suppress the reality that you may have missed out on some end of year tax planning just weeks ago. 

Either way, this is actually the perfect time to think about this year's tax strategy.

Today’s edition is all about charitable giving and how you can optimize your charitable intent. 

Let’s look at an example:

A lawyer has a solid income year. Maybe they closed a big case, made equity partner, or finally collected on some outstanding receivables. Tax bill hurts.

Their CPA says "You should think about charitable giving" and that's where the conversation ends.

What often doesn't get mentioned is how you give matters just as much as how much you give.

The Cash Trap

Most lawyers I talk to write checks to their favorite charities. Church, law school, local nonprofit—all good causes. All getting cash.

Here's what's happening: You're donating $10,000, getting a $10,000 deduction (assuming you itemize), and calling it done.

But sitting in your brokerage account is stock you bought years ago that's now worth $10,000. You paid $3,000 for it.

If you sold that stock to get the cash you donated, you just triggered a $7,000 capital gain. At 20% federal rates (23.8% if you include the Medicare surtax), that's roughly $1,660 in taxes you didn't need to pay.

But how are these things related? Glad you asked!

A Better Path

Gift the appreciated stock directly instead of cash.

You get the same $10,000 charitable deduction. The charity gets the same $10,000 (they can sell it tax-free since they're a nonprofit). But you avoid the capital gains tax entirely.

That's an extra $1,660 staying in your pocket.

For this to work smoothly, you'll want to set up a Donor Advised Fund (DAF). Think of it like a charitable investment account. You contribute assets (cash, stock, whatever), get an immediate tax deduction, and the funds sit there (or potentially grow through investments) until you're ready to direct them to specific charities.

The Roth Conversion Play

Let's say you're approaching retirement and your income is about to drop. Maybe you're stepping back from full-time practice, or you've already made the transition. This is prime Roth conversion territory—you may want to convert traditional IRA money to Roth while you're in a lower tax bracket.

Problem is, even a lower bracket means paying taxes on the conversion.

Solution: Pair the conversion with a DAF contribution in the same year.

Example: You convert $100,000 from traditional IRA to Roth. That adds $100,000 to your taxable income. But you also contribute $100,000 of highly appreciated stock to your DAF.

The charitable deduction offsets the conversion income. Net tax impact? Potentially zero.

You've moved money into a Roth (where it grows tax-free forever), funded your charitable giving for the next several years, and avoided a big tax bill.

Why January Matters

We're at the beginning of the year. You have twelve months to execute this strategy if it makes sense for your situation.

If you know 2026 will be a high-income year, you can set up a DAF now and fund it strategically throughout the year.

If you're planning Roth conversions, you can coordinate with your CPA early rather than scrambling in December.

And if you've been meaning to be more strategic about your charitable giving, you've got time to actually think it through rather than rushing checks out the door at year-end.

What This Isn't

I want to be clear about one thing: These gifting strategies are only beneficial if you’re already charitably inclined. In other words, you’ll more than likely end up with less wealth through tax-smart giving than not giving at all and just paying the taxes. 

You're still giving the same money to the same causes. You're just being strategic about timing and asset selection.

And this definitely isn't a replacement for talking to your CPA. These strategies need to fit your specific tax situation.

But if you're charitably inclined and you have appreciated assets sitting around, January is the right time to map out your approach.

The difference between writing a check and transferring stock can be thousands of dollars in your favor—money that could fund next year's charitable giving, pad your retirement accounts, or just stay invested for your own future.

Your generosity shouldn't cost you more than it has to.

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