A Tax-Efficient Way to Donate
A Tax-Efficient Way to Donate
If you’re taking Required Minimum Distributions (RMDs) from your IRA, I’ve got some info that could be helpful.
Basically, there’s a way to donate to charity and reduce your taxable income at the same time. They’re called Qualified Charitable Distributions (QCDs), and they let you direct your charitable contributions straight from your IRA to a 501(c)(3) charity. What’s great about this strategy is the amount you donate isn’t taxable to you!
So, let’s say your RMD is $30,000, but you donate $5,000 of that directly from your IRA to a 501(c)(3) charity. You’d only have to pay tax on $25,000 instead of the full $30k. This is better than just a deduction or a credit because it reduces both your taxable income and your adjusted gross income.
One thing to watch out for though: the 1099-R form you get probably won’t show the QCD, so make sure to tell your tax preparer how much you donated.
As a heads up, QCDs can only be made from IRAs, not Inherited IRAs or any other retirement plan. Also, the IRS limit on QCDs is $100,000 per year per taxpayer. And you need to be over 70 ½ years old to make a QCD, but one smart move is to wait until after RMD age to do it.
Of course, it’s always a good idea to talk to your financial advisor and tax advisor before making any decisions.
Related Topics
Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Wealth Partners, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Concord Wealth Partners. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Wealth Partners is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Concord Wealth Partners’ current written disclosure Brochure discussing our advisory services and fees is available upon request or on our website. Please Note: If you are a Concord Wealth Partners client, please remember to contact Concord Wealth Partners, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
