A lot of people make donations to their favorite charity or religious organization. And in most cases, the individual writes a check and, hopefully, takes a charitable tax deduction when it is tax-filing time.
An often-forgotten tax strategy is the Qualified Charitable Deduction (QCD). The QCD is a different take on securing a tax benefit for older taxpayers. Here are the basics:
- At age 72, you must begin taking Required Minimum Distributions (RMDs) from your retirement accounts. Those distributions are taxed as ordinary income.
- Beginning with the calendar year you turn age 70½, you can distribute up to $100,000 from an IRA account directly to a qualified charity (including a religious organization)…a QCD.
- While you do not receive a deduction for a QCD, it will reduce your adjusted gross income (AGI), which can lower your taxes on AGI items such as Medicare and Social Security.
So, if you are age 70½ or older, are planning to pull money from an IRA; and plan to give to charities, explore the tax advantage of the QCD. Your tax or financial advisor can show you how.
Challenge: If you know someone age 70 ½ or older, ask them if they are familiar with the QCD tax strategy or share this article with them to see if they can benefit from it.
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Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
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