Charitable Giving Goes Permanent

October 02, 2016
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SCENARIO

The year following an individual’s 70 ½ birthday they are required to distribute a minimum amount of their IRAs.  Often times they may not need this distribution and it can increase their Adjusted Gross Income.  This in turn can push them into higher tax brackets and limit certain deductions, phase outs, and exemptions. If you are considering charitable giving in 2016, consider a Qualified Charitable Deduction or QCD from your retirement account.  This can satisfy your RMD requirement, and at the same time lower you’re AGI.  Not to mention the benefits to your local charity and creating a legacy.

QUESTIONS TO PLAN AROUND

•Are you over 70 ½ and have an RMD that you don’t need for income?
•Do you enjoy donating to a recognized 501(c)(3)?
•Do you have an outstanding pledge for 2016 that needs to be completed?
•Do you use a standard deduction when filing?  If so this may be a way to get a tax break for charitable contributions by lowering your adjusted gross income.

THINGS TO CONSIDER

•QCD may not be done from an active SIMPLE or SEP if employer is contributing.
•QCDs are capped at $100,000 and there is no carryover for future years.
•A Direct Transfer with the distribution check payable to the charity is required.
•QCD is not eligible to Charitable-gift annuities, donor-advised-funds, or private grant-making foundations.
•Documentation to substantiate the donation is required.
•In 2015 QCDs were made permanent by Congress for 2016 and beyond. Now you can work with you CPA to plan.

ADDITIONAL RESOURCES

Slott, Ed.  “Charitable Giving Goes Permanent.”  Financial Planning February 2016:  58-59.  Print.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.