QUALIFIED CHARITABLE DISTRIBUTIONS
(QCDs)
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QCDs are an attractive option when:
- You do not need the RMD to support your lifestyle.
- You are charitably inclined.
- You desire to reduce taxable income.
- You do not need the RMD to support your lifestyle.
- You are charitably inclined.
- You desire to reduce taxable income.
About QCDs:
If you are 70½, you are required to take statutory distributions from your IRA each year, whether you need that money or not. The IRS has this Required Minimum Distribution (RMD) rule because you have not yet paid tax on the money in your IRA, and the IRS wants to ensure that you do so eventually.
The amount you are required to withdraw is a function of the balance of your IRA on December 31 of the prior year and your life expectancy based on your age. The penalty for not doing so is a 50% excise tax on the amount that you should have distributed from the account.
For those who do not need money from their IRA to fund living expenses, a Required Minimum Distribution (RMD) is an unwanted obligation as the distribution may be taxed at full ordinary income rates. An RMD is a taxable annual distribution from your IRA required by the IRS. For those in the highest current (2017) tax bracket, this would mean a $19,800 tax bill generated by a hypothetical $50,000 RMD, netting the taxpayer just $30,200 of the original amount.
In 2015, as part of the Protecting Americans from Tax Hikes (PATH) Act, Congress granted a permanent extension to Qualified Charitable Distributions (QCD). Rather than taking and paying taxes on your annual RMD, you can have that distribution sent directly to a qualified charitable organization tax-free. So, in the example above, rather than netting $30,200 of your RMD and paying $19,800 in taxes, you can have the full $50,000 (up to a $100,000 maximum) donated to a qualifying charity. If you are interested in utilizing the QCD strategy for all or part of your annual RMD, please contact us as the best way to coordinate this donation. It is vital that the funds be distributed directly to the charity of your choosing in order to qualify for the full tax-free treatment under QCD rules, as opposed to the funds being first distributed to you and then on to the charitable organization.
If you are 70½, you are required to take statutory distributions from your IRA each year, whether you need that money or not. The IRS has this Required Minimum Distribution (RMD) rule because you have not yet paid tax on the money in your IRA, and the IRS wants to ensure that you do so eventually.
The amount you are required to withdraw is a function of the balance of your IRA on December 31 of the prior year and your life expectancy based on your age. The penalty for not doing so is a 50% excise tax on the amount that you should have distributed from the account.
For those who do not need money from their IRA to fund living expenses, a Required Minimum Distribution (RMD) is an unwanted obligation as the distribution may be taxed at full ordinary income rates. An RMD is a taxable annual distribution from your IRA required by the IRS. For those in the highest current (2017) tax bracket, this would mean a $19,800 tax bill generated by a hypothetical $50,000 RMD, netting the taxpayer just $30,200 of the original amount.
In 2015, as part of the Protecting Americans from Tax Hikes (PATH) Act, Congress granted a permanent extension to Qualified Charitable Distributions (QCD). Rather than taking and paying taxes on your annual RMD, you can have that distribution sent directly to a qualified charitable organization tax-free. So, in the example above, rather than netting $30,200 of your RMD and paying $19,800 in taxes, you can have the full $50,000 (up to a $100,000 maximum) donated to a qualifying charity. If you are interested in utilizing the QCD strategy for all or part of your annual RMD, please contact us as the best way to coordinate this donation. It is vital that the funds be distributed directly to the charity of your choosing in order to qualify for the full tax-free treatment under QCD rules, as opposed to the funds being first distributed to you and then on to the charitable organization.
If you are interested in this donation option, please email us at campriverridge@gmail.com to get the process started.