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Are you taking advantage of tax breaks through qualified charitable distributions?

May 08, 2019
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Everyone who is subject to Required Minimum Distributions who gives to a charity should use Qualified Charitable Distributions (QCDs), but must qualify by being age 70 ½ or over. Say for example you give $10,000 to your church or another non-profit organization on an annual basis. If you are taking RMDs, you can have your IRA custodian write a check payable to the charity and send it directly to the charity. In this case, $10,000 is excluded from your taxable income. It lowers you Adjusted Gross income (AGI). This is much better than a tax deduction!

The rules are as follows:

· You must be age 70 ½ or older and have an IRA

· The payment must go from your IRA custodian to the charity, or several charities

· The first funds that come out of the IRA each year are the RMDs so you should consider making your donations early in the year

· It is helpful for your financial advisor to send a letter to you, confirming the transaction, so you can provide the letter to your tax preparer

The benefits of QCDs:

· QCDs satisfy your RMD

· Keep you AGI lower – RMDs increase your tax bill where QCDs cut taxes since the RMD amount given to charity is excluded from income

· Can increase medical deductions

· Can lower Medicare premiums, in some cases substantially

· Can benefit those who claim the standard deduction

· Can benefit those who may have their charitable deduction limited

· Will almost always save taxes – it will never raise taxes

· Large allowable QCD limit – $100,000 per person, per year