Happy New Year! I hope everyone had a great holiday season with friends and family. For those of you that are still in the giving mood, but would like to save on your taxes while gifting, you’re in luck. There’s a secret the IRS is sitting on. If you are 70.5 years old or more, the IRS will allow you to donate Traditional IRA assets, effectively lowering your taxable income. The name of this obscure strategy is the Qualified Charitable Distribution or QCD.

Since millions of Americans will no longer be able to deduct charitable contributions, this is a welcome surprise. It’s not new, but, because of the new tax overhaul, there is a renewed need for many to find more deductions. This strategy almost doubles the standard deduction folks get if they don’t itemize write-offs for state taxes, mortgage interest, donations, and the like, on schedule A.

Folks 65 and over can take the standard deduction (13,600 for individuals and 26,600 for joint filers). If you are 70.5 and over, you have the best of both worlds. You can take the standard deduction and use the QCD.
For example, if you are over 70.5, you must take your Required Minimum Distribution or RMD. If you are taking the standard deduction, you don’t get a write-off for charitable contributions in excess of the standard deduction. Now, you won’t get a write-off for the contribution from your IRA, but you won’t have to pay tax on the portion of the Required Minimum Distribution that is donated. This will effectively reduce your overall taxes. But wait, that’s not all! It will also lower your Adjusted Gross Income or AGI. This can reduce the amount that you pay for Medicare Part B and Part D premium.

If you have additional questions, please ask your advisor here at American Retirement Advisors or your tax professional.


Have a great year!