Qualified charitable distributions from your IRA have become more beneficial
For taxpayers concerned that they’re losing itemized deductions for their charitable contributions under the new tax law, qualified charitable IRA distributions may offer a solution. 415 Group Senior Manager Ron Butler, CPA, CVA, MT, explains the potential benefits.
With the new tax law, since it essentially doubles the standard deduction, fewer people will be able to itemize. But these qualified charitable IRA distributions are a way to still get a tax benefit from your charitable contributions.
If you’re over the age of 59 and a half — which means you can take distributions from your IRA without penalty — this may be a new area where you could see some benefits through proper planning. It could be especially beneficial for taxpayers over the age of 70 and a half, who must take a required minimum distribution from their IRA, even if they don’t want to at that point.
So, say for example, you have an older couple that doesn’t want to start taking distributions yet, but they give $1,000 to their church each month. They could instead make that donation directly from their IRA, since they’re required to take that distribution anyway. That would leave them with more discretionary income, and in effect, they’re getting a tax break.
One thing that I think is an interesting point — qualified charitable IRA distributions are not included in your income calculation, so it won’t push you into a higher tax bracket, and it doesn’t affect the taxability of your social security.
At 415 Group, we can be proactive with your tax strategy, and help you put a plan in place before the end of the year. Contact us to get started.