Michael's Message - You Can Get Both!
Can a person get both the full Standard Deduction AND a tax break on Charitable Giving?
If you are considering charitable giving, the new tax law raised the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly and surviving spouses. Whether you itemize or not, can you still get a tax break on your charitable giving ON TOP of the new higher standard donation?
YES! If you are 70.5 years old and have a traditional IRA, you can donate up to $100,000 per year tax free by having the money transferred directly from your IRA custodian to the charity of your choice – which we hope is Sequim Senior Services, dba Shipley Center! You can do this with all or a part of your RMD (Required Minimum Distribution) from your IRA, and avoid the taxes you would normally pay on it. One of our members recently used this strategy to donate $1,500, which was greatly appreciated and will same them money on their taxes!
The IRS calls this a QCD or Qualified Charitable Distribution. The IRS website says:
What is a qualified charitable distribution?
Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70 1/2 or over that is paid directly from the IRA to a qualified charity.
Can a qualified charitable distribution satisfy my required minimum distribution from a IRA?
Yes, your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA.
How are qualified charitable distributions reported on Form 1099-R?
Charitable distributions are reported on Form 1099-R for the clanedar year the distribution is made.
How do I report a qualified charitable distribution on my income tax return?
To report a qualified charitable distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions. On the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution. Enter “QCD” next to this line. See the Form 1040 instructions for additional information.
If you have your RMD set up to automaticallly get paid out to you between now and the end of the year, you may want to contact your IRA custodian to stp that automatic payment to enable you to do a QCD. Once you have taken the RMD the normal way, you cannot go back and make it into a QCD.
For more information, there is a great article on this topic.
The information I am sharing here is for information only. Please consult your tax advisor for suitability to your situation.
Thanks for your support!