As the end of the year fast approaches, you may be ready to make year-end charitable contributions. Whatever cause you value most deeply, changes to the tax code in 2020 may limit the tax deductions you can take for charitable donations.
However, another way to lower your tax bill is qualified charitable distributions (QCDs). A QCD is a nontaxable distribution from your IRA that is paid directly to a qualified charity of your choice. You do not receive a tax deduction for the gift, but the transfer from your IRA is not counted as taxable income. You can make a QCD starting at age 70 ½.
For those 72 and older and taking required minimum distributions (RMDs) from your tax-deferred retirement accounts, QCDs provide an additional benefit. You can use a QCD to offset the impact of RMDs on your taxable income. How does it work? When you gift your RMD withdrawal amount to a charitable organization via a QCD, you lower your taxable income by the total amount of the gift.
When making a QCD, there are some requirements to be aware of:
Connect with us before the end of the year to better understand how a QCD can lower your taxable income. We can discuss the requirements and determine the best strategy for helping you give generously to others—while also giving generously to yourself through tax savings.
Plan Your Charitable Giving Before Year-End
November 29, 2022