Benefits of IRA Qualified Charitable Distributions
With the passage of the Tax Cuts & Jobs Act (TCJA), many taxpayers will no longer itemize their deductions, and as such, will not be able to take advantage of tax savings through charitable contributions. The qualified charitable distribution (QCD) is an attractive tax planning tool for senior taxpayers looking to meet their individual retirement account (IRA) required minimum distributions while making a tax deductible charitable contribution.
QCDs can benefit those taking the standard deduction if they choose to make their charitable contributions directly through an IRA distribution. Thus QCDs may lead to significant tax savings.
Recognizing that taxpayers may want to explore the option of using QCDs, there are numerous requirements, such as limitations on the QCD amount that may be excluded from gross income in a tax year, the types of IRAs that distributions can be made from, the manner in which the distribution should be made, and the required timing of the distribution.
Other noteworthy considerations include carryover provisions for unused portion of the QCD allowed for a taxpayer for a tax year, whether contemplated Roth conversions still make sense to them in the long run, and the state income tax implications of a QCD.
This tax planning tool may have additional impacts on your tax filings, such as lessening the effect of phase outs and limitations on other benefits. Our experienced professionals and advisors at Gramkow Carnevale Seifert & Co., LLC can be a valuable asset to determine how QCDs may impact your individual tax planning.
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