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Older than age 70 1/2? Have an IRA Account? Donate to Charity?

Whelan Financial Planning - Wednesday, November 14, 2018

If you own an IRA account and are older than 70 ½, you know you must take Required Minimum Distributions (RMD) from those accounts.

If you are charitably inclined, you should consider taking advantage of the Qualified Charitable Distribution (QCD) strategy.  This strategy allows you to reduce your taxable income by the amount of any RMD that you make directly to charity.

To take advantage of this, you must instruct your Financial Adviser / Broker / IRA custodian to send all, or some, of your IRA distribution directly to the charity.  Use the words “Qualified Charitable Distribution” when you talk to them.  You can then exclude the amount of the Qualified Charitable Distribution from your taxable income.  (Please be sure to tell your tax preparer that you did this!  The 1099-R forms you receive at tax time may not clearly state that you made a QCD.)

Many of my clients in Westchester, Long Island and NY City won’t be able to itemize deductions when they prepare their 2018 Income Taxes because of the $10,000 cap on State and Local Tax Deductions.  If you can’t itemize deductions, you will not get a tax benefit for making charitable contributions.   The Qualified Charitable Distribution may allow you to get the same tax break that you received prior to the change in the tax law!

One final detail – be sure the charity is a Qualified Charity.  You can check that here https://apps.irs.gov/app/eos/

If you have questions about how this might work for you, don’t hesitate to call me at 1-800-775-8564 or send an email to maureen@mawhelanfinancial.com.

COMMON SENSE DISCLOSURE – This is general information.  Everyone is different.  You won’t know if this strategy makes sense for you unless you talk to your financial adviser or tax preparer.