Here is a year-end tax-saving tip for owners of traditional IRAs aged 70½ or older (who are subject to an annual Required Minimum Distribution (RMD) from their IRAs) and who use a standard deduction rather than itemizing their deductions AND who want to donate to an eligible charity.

 

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Tip: Don’t overlook what is known as a Qualified Charitable Distribution (QCD).

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A QCD goes straight to the charity of your choice and bypasses your Adjusted Gross Income (AGI) entirely. But if you accept the full amount of the RMD then make a charitable contribution, the full amount of the RMD will be taxed to you. But you won’t be able to deduct the donation because you are using the standard deduction.  Here is a quick example:

 

Your AGI before the income from your RMD puts you in a 22% tax bracket AND you are using the standard deduction AND you want to make a $20,000 contribution, your tax bill will be $4,400 ($20,000 x 22%) less than it would have been had you taken the full amount of the RMD and then written a check for the charitable contribution.

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So, plan ahead for any year-end charitable contributions. And please remember the great charitable work of the Ebby Halliday Foundation. 

 

For additional information email info@ebbyhallidayfoundation.org.