Maximize Your Charitable Giving Under the New Tax Law Using Your RMDs
If you claim the standard deduction on your taxes, then your charitable giving will not be tax-deductible. Not that tax incentives should be the sole reason for giving, but this may reduce the impact of your donations. So, what to do? Here is a plan for you to consider.
Benefit from Setting Up A Qualified Charitable Distribution (QCD) Plan
A QCD is a tax-smart plan that allows you to transfer any amount tax-free up to $100,000 per year from your IRA directly to a qualified charity. It is only available to IRA owners who are 70 ½ years of age or older.
Any amount processed as QCD counts towards your Required Minimum Distribution (RMD) requirement, satisfies your charitable intentions, and can save money on your taxes today and in the future by reducing the taxable amount of your IRA distribution—while lowering your adjusted gross income and taxable income.
For example, a 70-year-old couple, who has an annual RMD between the two of them of $24,000, can instead direct $10,000 of it to charity as a QCD, it will reduce their taxable income by $10,000 and they still get to claim the same $26,550 standard deduction. In this case, if the couple is in the new 24% tax bracket, they would have saved $2,400 in federal taxes alone—and potentially more in state tax savings. Source: Kiplingers.com
Then, If you want, you can 'amplify' your donation via a charitable life insurance policy (on you or another healthy adult) and direct the policy to a qualified charity. So instead of donating a small amount you can create a larger impact than you ever thought possible.
Key Questions to Ask
- Are you likely to claim the standard deduction, and would you benefit from a QCD?
- If you are younger than age 70 1/2, how are you adjusting your retirement spending to take advantage of this provision once you turn 70 1/2?
- Would you like to give more to your favorite charity and keep more for yourself?
This could become commonplace in the near future. Contact us for complete details.