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By: Paul D.

on

March 7, 2019

Eliminate Taxes on Your RMD’s with Charitable IRA Distributions: Requirements?

Topics: Income & Taxes

RMD’s as stated in their name, are REQUIRED.

Not everyone needs money from their IRA so if you are forced to take this additional income you may have considered donating this to charity.

Do YOU Qualify to Have a Qualified Charitable Distribution Come Straight from Your IRA?

Just be aware, even when you do a QCD (Qualified Charitable Distribution), it will still show up on your 1099-R as a distribution. The QCD does not show up on the 1099-R. So it is up to you to tell your tax preparer of the charitable giving. You should receive something from the charity typically by mail, so when you do, make sure you place it with your other tax forms as a reminder.

Record keeping is essential, as you may know, the IRS can come back and ask why the difference between your 1099 and what was reported at any time in the future (at least in the next 7 years).

The QCD rule allows people who are age 70 1/2 and older to transfer up to $100,000 directly from their IRA to charity each year tax-free. This money can be counted towards their required minimum distribution but isn’t included in the adjusted gross income. Please remember that if you do not meet the age requirement than this is not an available option for you.

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When It Must Be Done…

  • Please understand that the QCD has the same requirements that your RMD has, it must be done by December 31st (unless it is your first year an RMD is required). Do not wait until last minute on this, getting a head start is important to make sure that the money is out of the account and the charity cashes the check before the end of the year.
  • If you have already taken out your RMD it is too late to request it as a QCD and will, unfortunately, be counted towards a distribution. You can still give it to charity but will be treated differently depending on your complete tax situation. We are not tax advisers and will always recommend you consult in someone who specializes in taxes, a local CPA.

Make Sure the Charity Qualifies to Receive Your QCD...

One last quick thing…

Be sure to check that the charity is indeed eligible to receive tax-deductible charitable contributions. The list of entities that are eligible for the QCD is not the same as the entities eligible for a typical charitable deductible donation, it MUST BE a 501(c)(3) charity.

Take a look at the list that the IRS provides here: IRS website

As already stated, please do not take this as tax advice; these are just some things we make aware to clients and want you to know what questions you should be asking your CPA.

Is a QCD a right move for you to lower your tax bill?

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