For taxpayers who are 70 ½ and older, you can take the Standard Deduction when you file your taxes and still benefit from your charitable giving. Many taxpayers no longer itemize their deductions with the higher standard deduction as a result of the Tax Cuts and Jobs Act 2017.
The strategy is called the Qualified Charitable Distribution or QCD. It is only available to taxpayers who are 70 ½ and older.
Instead of writing a check from your checkbook, you instruct the custodian of your IRA to make a check payable to a charity of your choice directly from your IRA account. The good news is a gift from your IRA directly to a charity will count towards your RMD for that calendar year. You may give a portion of your RMD, or all of it, or even more up to $100,000 per year per taxpayer. If you give to your church or your school or other charity it is very important that you learn about this tax strategy.
This is a way to get money out of your IRA tax free! You may not have enough deductions to itemize, especially with the new higher Standard Deduction. When you use this giving strategy, you won’t pay tax on your charitable giving and you can still take the full Standard Deduction. Your gifts to charity can be free of taxes without itemizing.
Depending upon your own situation giving to charity from your IRA could lower the tax you have to pay on your Social Security benefit. Depending upon your Adjusted Gross Income it could keep you from paying an increase in the Medicare premium. If you no longer itemize, it could reduce your overall tax bill.
Reducing your taxes is important and giving through your IRA instead of your checkbook is a winning strategy.
Call Guelich Capital Management to speak with an advisor if you have questions about your Required Minimum Distribution or giving to your favorite charity through IRA distributions.