Charitable Gifting and RMDs
Jeffrey C. Vahanian, CFP ® President
Cameron V. Corsi Director of Business Development & Investment Research
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.