Seniors Can Reclaim Charitable DeductionsSubmitted by Integras Partners on September 18th, 2019
Seniors Can Reclaim Charitable Deductions
Many Americans lost the ability to deduct charitable contributions with recent tax changes. But, those subject to Required Minimum Distributions (RMD’s) there is a way to save money by reducing taxes!
The Tax Cut and Jobs Act of 2017 took effect last year and greatly reduced the number of people eligible to itemize deductions. The threshold for itemizing (the standard deduction)was doubled. Plus, the combined state income tax and property tax deduction is now limited to $10,000. So, it’s even harder to meet that higher threshold.
RMD’s begin the year an IRA owner turns 70 ½ and force taxation. The Qualified Charitable Distribution feature allows for any part of an RMD to be paid directly to a charity. This avoids income taxes, so it’s better than a deduction.
For example; if you typically give $10,000 a year to your favorite charities your probably paying taxes on this money first. So, it costs you $12,200 or more including taxes. If you make gifts straight from your IRA, you keep more than $2,000 (plus any state tax) in your bank account!
To maximize this opportunity, complete the gift before New Year’s Eve to lower this year’s taxable income. The recipient must be a recognized 501(c)(3) charity (which is typical of religious, education, community service, and national organizations). Your IRA custodian may have a minimum amount per gift and will have their own paperwork to complete. You can gift as much, or to as many charities as you wish, up to the full amount of your RMD.
This is just one of the tax management strategies we employ at Integras Partners. For ideas on how we might help you invest intelligently, nurture your communities and enjoy financial peace, schedule a call with us!