Getting more “bang” for your charitable donation “buck”

by Paul Dreher, Financial Advisor, The Retirement Planning Group

For many people the holiday season is more than a time of thanks, gatherings, and celebration. It is also a time of finishing Required Minimum Distributions. Perhaps extra holiday cash is well-timed. You may have an annual tradition of re-investing a possible surplus of income back in to their portfolio. Plus, more folks than in the past are considering making a Qualified Charitable Donation (QCD) as a portion of their Required Minimum Distribution.

A QCD is a direct transfer of funds from one’s IRA payable to a qualified charity. Making a charitable contribution in this manner potentially offers greater tax avoidance for the donor. Here is an example:

John is 75 years old and has a Required Minimum Distribution amount of $30,000 for the year 2019. He can donate $10,000 directly to Kansas City Hospice or a 501c3 recognized organization tax-free. Thus, he can reduce his taxable income for the year by the $10,000. John would receive a check made payable to the charitable organization then would indicate his donation on his tax return.

If John received his full Required Minimum Distribution of $30,000 as a withdrawal made payable directly to himself THEN donated $10,000 to a charity he may NOT actually reduce his taxable income. Millions of people now take the standard deduction as a single individual of $12,200. John misses out on the exxtra $10,000 charitable deduction.

Thus, in John’s case the QCD allowed him to take his reduction of taxable income from the standard deduction and the charitable donation for a total reduction of $22,200.

A few things that John needs to keep in mind are:

  • He must have fully reached age 70.5 before he makes a Qualified Charitable Distribution
  • The maximum annual exclusion for a QCD is $100,000/year for an individual
  • If he has non-deductible money co-mingled with deductible money in his IRA only the deductible dollars qualify for the QCD
  • He should consult his tax preparer and/or financial advisor if he has those relationships

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About Us

Kansas City Hospice is KC’s original hospice and one of the very few out of the 40 plus hospices in the area that are nonprofit. Every dollar donated to Kansas City Hospice remains right here in the greater KC area. Each donation, large or small, helps provide expert, compassionate care to the people of Kansas City. From the youngest child to the oldest of senior citizens, Kansas City hospice cares for the community.
The mission of Kansas City Hospice & Palliative Care is to bring expert care, peace of mind, comfort, guidance, and hope to people who are affected by life-limiting illness or by grief. And, our vision is that each person in our community is valued from life through death and each family is supported in their grief.

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