Both charities and seniors were disappointed to learn that charitable deductions may no longer be deductible as the standard deduction doubled under the new tax law. And, if a taxpayer uses the standard deduction, doubled under the new tax law, they are not able to deduct charitable gifts as well. Forbes estimates that as a result of this change in the tax law 21 million taxpayers will stop making charitable donations. Seniors donate to causes or institutions they believe will make a difference and would like to continue to do so but are distressed that this deduction may no longer be available to them. But,interestingly enough, there is another way to donate and benefit tax-wise for those who are 70 ½ with IRAs and thus taking Required Minimum Distributions(RMDs).
The provision in the tax law goes by the name of “qualified charitable distribution” or QCD. It allows any taxpayer over 70 ½ to make donations via a transfer directly from their IRA account to a charitable organization. According to the U.S.Census data, about 3.2 million taxpayers turned 70 in 2018 – 50% more than in 2010! The trend is clear and good for seniors and charities alike.
Seniors who take the $12,000 standard deduction (twice as large as last year) and also use the QCD method to donate to charities will net them some additional tax benefit. Being that it is the end of 2108 and most taxpayers have already received their RMDs, this is something to discuss with one’s CPA or wealth manager for 2019 so that if the RMDs are automatically scheduled they can be adjusted for the donations. It is recommended that each year’s donations are executed early in the year so there is no confusion by year’s end or over distribution via an automatic withdrawal. There are special aspects of the OCD that must be met so the first place to start this process is with one’s CPA or wealth manager.
Seniors want to continue their donations and this provision of a direct transfer gives them a little extra help.
