By Gerry Klump, Former Enrolled Agent and Gilda’s Club volunteer
Fall is here and time for some yearend tax planning. This year, even if you don’t itemize, you are able to deduct on your federal tax return charitable contributions of up to $2,000 for married filing jointly and $1,000 for single filers. Any remaining charitable contributions may be deductible if you itemize.
Donating appreciated property held more than 12 months is also a great tax planning idea. You not only eliminate the Capital Gains tax and any Medicare surtax, but can deduct the fair market value of the asset donated.
For those 70 ½ or older there may be an even better tax beneficial way to give. Enter the Qualified Charitable Distribution (QCD).
A QCD is a direct transfer of funds from your IRA custodian, payable to qualified charities up to $100,000 per year. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met. In addition to the benefits of giving to a favorite charity, a QCD excludes the amount donated from taxable income, which is unlike regular withdrawals or RMDs from an IRA. Keeping your taxable income lower may increase certain tax credits and deductions, reduce the taxable amount of Social Security, lower your tax rate on capital gains and reduce future Medicare premiums.
Also, QCDs don’t require that you itemize, which due to the recent tax law changes, means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.
Consult a tax advisor to determine if making a QCD is appropriate for your situation and if your IRA and charity qualifies for QCDs.