RMDs and QCDs

By Kristina Spieker, CPA

If you are 70 ½ or older, the IRS rules require you to take required minimum distributions (RMD) each year from your tax-deferred retirement accounts. When you are planning your IRA withdrawal strategy, you might want to consider making a charitable donation through a qualified charitable distribution (QCD). We have seen taxpayers miss this opportunity in the past and this year with the new Tax Cut and Jobs Act, it is even more beneficial to many people. QCDs are a great tool for charitable individuals to utilize to fulfill their RMD while also still getting a deduction for the charitable gift that they were planning on giving.

So, what exactly is a QCD? A QCD is a direct transfer of funds from your IRA custodian that is payable to a qualified charity. The standard deduction has almost doubled from the prior tax law starting on 2018 tax returns. In 2019 the standard deduction for single taxpayers will be $12,200 and the standard deduction will be $24,400 for married filing joint taxpayers. If you are over 65 the additional standard deduction is $1,650 for unmarried taxpayers and $1,300 for married taxpayers. With these large increases in the standard deduction, many taxpayers lost the benefit of deducting their charitable gifts. When you take a QCD, the added benefit is being able to exclude that amount donated from your taxable income. There is no need to itemize deductions to reap the benefit of the charitable gift. Being able to do this potentially enables taxpayers to reduce the impact to certain tax credits and deductions including Social Security taxability by directly lowering their taxable income. The maximum amount that can qualify as a QCD is $100,000 per year per taxpayer. Please let us know if you have questions about your situation and if you are interested in exploring a QCD.

Kristina Spieker, CPA | Manager