Give to Charities? Want to take Standard Deductions and Charitiable Deductions?

[cr-stagg]

Do you give substantial gifts to charities? 

Are you 72 years old or older? 

Do you have a Traditional IRA? 

Do your Itemized Deductions do not exceed the Standard Deduction? 

If you answered YES to all the questions above you need to investigate Qualified Charitable Distributions.    See IRS Pub 590-B. 

What does a Qualified Distribution (QCD) do for you?  In short it decreases the taxable amount of the Required Minimum Distribution (RMD) from your IRA.   Example: 

Couple A have an income of $100,000 which includes  $20,000 RMD from their IRA.  Their itemized deductions which include $10,000 given by checks from their bank account to Charities amounts to $22,000.  So the Standard Deduction $27,800, plus $600 of the $10,000 given to charities, reduces their taxable income to $71,600. 

Couple B also have an income of $100,000 which includes  $20,000 RMD from their IRA. And their itemized deductions do not exceed the Standard Deduction.  But instead of writing checks from their bank account to gift to charities they direct the administrator of their IRA to write checks to the charities for the $10,000.  This reduces the taxable amount of their RMD to $10,000 and their taxable income to $61,600.  Since they are in the 12% tax bracket that amounts to a $1200 savings in taxes. 

So for us "Old Geezers" it matters which pocket we dip into when giving money to charities.

[juliaelder232]

A Qualified Charitable Distribution (QCD) allows individuals who are 70½ years old or older to directly transfer funds from their Traditional IRA to a qualified charity. This transfer counts towards their Required Minimum Distribution (RMD) but is not included in their taxable income, providing potential tax advantages.

The example you provided illustrates how a QCD can reduce the taxable amount of the RMD, leading to lower taxable income and potentially lower tax liability for those who take the standard deduction.

It's important for individuals who meet the criteria for QCDs to follow the IRS guidelines outlined in Publication 590-B to ensure compliance and maximize the tax benefits.

Remember that tax laws and regulations can change over time, so it's always best to consult with a qualified tax professional or financial advisor for personalized advice based on your individual circumstances.