Retirement Income Toolbox

February 15, 2018

The following is a summary of an article from Investment News .com Jan 2018 by Ed Slott.  With the recent changes in tax laws, I think it is valuable and interesting information and wanted to pass it on.

Why aren’t clients using QCDs (Qualified Charitable Distributions) Help them!

Thanks to tax reform, qualified charitable distributions are now more valuable than ever.

The ta-reform law is now in effect.  Clients can take advantage of tax savings with their IRAs.

As far as tax savers go, this is a simple one.  Use qualified charitable distributions to maximize the new higher standard deduction.  But just because its so simple doesn’t mean it won’t have a big impact.

The new law doubles the standard deduction to $12000 per person and $24000 per couple.  Many of our clients will now be claiming the standard deduction.

The QCD provision, allowing direct rollovers from an IRA to a charity, has been a permanent provision in the tax law since 2015.  But most clients who qualify are still not taking advantage of it.

The QCD can effectively expand the increased standard deduction amounts and result in big tax savings.

QCDs themselves did not change under the new law.  But their impact did.  QCDs have been made more valuable than ever, and every client who qualifies should be making their donations using them.

Since many clients may not have enough charitable, medical or other remaining deductions that survived tax reform to itemize, they will use the standard deduction.

But that amount can be increased.  The QCD can add to the standard deduction, resulting in effect, in getting the standard deduction plus a charitable deduction.

Not all clients qualify for QCDs, so make sure to consult your CPA or tax consultant.  IRA owners and beneficiaries who are 70 ½ or older may qualify.  The donation must be directly transferred from the IRA to the charity and nothing can be received in return for the donation.  Gifts to donor=advised funds or private foundations do not qualify.  The annual limit is $100,000 per person, so that should be enough for most clients.

If the clients are a married couple who both qualify for the QCD and have IRAs subject to required minimum distributions they can each use the QCD and increase their tax benefit.

A tax deduction for the contribution cannot be taken, but the amount transferred from the IRA is excluded from income and it counts toward the RMD.  Excluding the mount from income is a better tax benefit than receiving a tax deduction, because it keeps income lower.  This allows more AGI-based tax benefits, resulting in a lower tax.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.