Tax Tip….RMD & QCD! – May 10, 2019

Hello Fellow Taxpayers,

Ali, Marissa and I are in LA attending our mastermind meeting in LA. However, I want to share some information with you. We are always working hard to improve our practice and service and meetings like this help take us to the next level.

Under the Tax Cuts and Jobs Act, many taxpayers did not have to itemize their deductions on their tax return, which was one of the reasons for the new law. The other reason for the new law was tax simplification. Even if you thought the law made things easier, take it from a tax pro, not so much.

I have a little tax savings tip for those of you who already reached your 70 and half birthday or who will reach it this year. When you reach this age, you are required to take a distribution from your IRA (not a ROTH). It is called your Required Minimum Distribution or RMD. This distribution is taxable to you. You will get Form 1099R, and we include it in your income, just like we did when we reported your W2 wages.

So what is the tax savings? If you want to make a contribution to your favorite charity, you will pay tax on your IRA distribution, but will not get a benefit from the charitable donation unless you itemize your deductions. I know that you make these donations for philanthropic reasons, but you might as well get a tax break. If you do not itemize, you do not get the break.

TIP: What you have to do is tell the financial institution that would have sent you your RMD directly to you, make the donation directly to the charity of your choice, on your behalf instead. You do not get the money, the charity does. The benefit is that you do not have to include what you contributed to the charity in your income. On top of that, the amount donated directly to the charity satisfies your RMD for the year. This is technically called a “Qualified Charitable Donation” or QCD.

If you are interested and would like further information, let me know, as there are some limitations.

So until next time,

CYA

Jeffrey “I do not qualify for a QCD” Schneider