Charitable Gifting and RMDs
he season of giving thanks is upon us. During this time, many people choose to make gifts to charities, individuals and their respective communities in distinctive ways. This time of year is often a time for personal reflection, New Years resolutions and planning for the coming year. But however you choose to spend the holiday season, the topic of Required Minimum Distributions (RMD’s), which come into play upon attaining the age of 70 1/2, may also be part of your discussions or planning for the coming year. With that thought in mind, if you have an IRA that requires an RMD and you are also considering gifting to a charity, there is a potentially advantageous way to accomplish both simultaneously. This is where something called a Qualified Charitable Distribution (QCD) can come into play. With a QCD, as an IRA owner, you may designate all or a portion of your Required Minimum Distribution for a Direct Transfer, to a charity or charities of your choosing so long as certain rules are met.
By utilizing a QCD strategy, there are potential tax advantages because such a distribution, unlike regular IRA withdrawals, is excluded from your taxable income. A lower taxable income may help preserve tax credits and deductions which could also impact your Social Security benefits and Medicare costs.
Additionally, since QCDs do not require a taxpayer to itemize on their tax return, the added flexibility may well allow you to benefit from using the now higher Standard Deduction for tax filing purposes. You also retain the benefit of itemizing if that is the filing option that serves you best. In essence, by comparing strategies, you may be able to give charitably but preserve other benefits that might be sacrificed if you took your RMD directly and then made a charitable gift.
Currently, the maximum QCD an individual can make in single tax year is $100,000. One’s spouse can do the same if they have their own IRA assets and meet the requirement of being age 70 1/2.
If making a charitable contribution is something you are interested in, for future planning, and this information has piqued your interest, we would be happy to discuss and help facilitate this type of distribution. We also encourage you to speak with your personal accountant for further details about how a charitable RMD might impact your personal situation. As the year comes to a close, we are proud to be of service to all of our clients, family and friends. We wish everyone a happy holiday and happy new year.
Vahanian & Associates (“Vahanian”) created this presentation for its website. Any other distribution of this presentation is strictly prohibited. While the content presented is believed to be factual and up to date, it is based on information obtained from a variety of sources. Vahanian believes this information is reliable, however, it has not necessarily been independently verified. Vahanian does not guarantee the complete accuracy of all data in this blog post, and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of Vahanian as of the date of publication and are subject to change. This blog post does not constitute personalized advice from Vahanian or its affiliated investment professionals, or a solicitation to execute specific securities transactions. Vahanian is not a law firm and does not intend for any content to be construed as legal advice. Readers should not use any of this content as the sole basis for any investment, financial planning, tax, legal or other decisions. Rather, Vahanian recommends that readers consult Vahanian and their other professional advisers (including their lawyers and accountants) and consider independent due diligence before implementing any of the options directly or indirectly referenced in this blog post.
Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by Vahanian, will be profitable or equal any historical performance level. Any index performance data directly or indirectly referenced in this blog post is based on data from the respective copyright holders, trademark holders, or publication/distribution right owners of each index. The indexes do not reflect the deduction of transaction fees, custodial charges, or management fees, which would decrease historical performance results. Indexes are unmanaged, and investors cannot invest directly in an index.