Part 1 – The New Tax Law and IRAs

July 03, 2018
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IRA’s and Charity in 2018

A Qualified Charitable Contribution (QCD) A Qualified Charitable Contribution (QCD) is a direct transfer of funds from your Individual Retirement Arrangement (IRA), made payable to a qualified charity. The distribution, if done correctly, can be excluded from taxable income. In addition, as long as several rules are met, a QCD can count toward satisfying your required minimum distribution (RMD). You must be age 70.5 or older to take advantage of this.

Before 2018 - Back in late 2016, I did a workshop for a few clients that included the topic of making QCD’s from their IRA’s. At the time, very few of them could benefit greatly from it because they could just as well take the distribution for themselves, pay taxes, make a donation to charity, and deduct the gift as an itemized deduction on line 16 of schedule A.

In 2018 - Fast forward to today, with the Tax Cuts and Jobs Act raising the standard deduction to $12,000 for individuals and $24,000 for couples filing jointly, fewer and fewer people are able to deduct charitable contributions as an itemized deduction because the standard deduction is higher. You have to choose to either itemize deductions or take the standard deduction.

With this in mind, it may make sense for some people to consider a QCD, where they are able to give to the charity directly from the IRA and avoid paying the income tax on this distribution.


Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss.