Is a Charitable Distribution Right for Me?
If you have not already taken your required minimum distribution (RMD) for 2017, you may want to consider making a qualified charitable distribution (QCD) through your IRA. Of course, before doing so, you want to know the answer to one important question: Would you benefit from making a QCD? If you fall into one of the following categories, the answer may be "yes":
1. You have a high adjusted gross income.
Some expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income (AGI). For instance, miscellaneous itemized deductions must exceed 2% of AGI to be deductible; medical expenses and casualty losses must exceed 10%. QCDs can reduce AGI by taking the place of otherwise taxable RMDs, meaning it may be possible to lower your threshold for deducting certain expenses.
2. You pay income tax on Social Security.
As explained above, QCDs can reduce AGI. For retirees, a lower AGI can possibly result in lower taxes on any Social Security benefits you received in 2017.
3. You want to reduce your estate tax burden.
Your IRA is included in your estate after you die, meaning it could be subject to the estate tax. If you are looking to reduce the value of your estate to fall under the estate tax threshold, QCDs are one method to achieve that reduction. Because you can give up to $100,000 per year through QCDs, you can reduce the balance of an IRA (and thus the value of your estate) with charitable gifts over several years.
4. You can't deduct all your charitable contributions.
In any given year, the most you can claim for a charitable-gift deduction is 50% of AGI (although deductions in excess of that amount can be carried over for up to five years). However, gifts made directly from IRAs (e.g., a QCD) are not included as part of this 50% limitation. This means QCDs can reduce your 2017 tax burden over and above ordinary charitable contributions.
Get a Free Consultation
There are many factors that go into determining whether you should make a QCD from your IRA. With all tax issues, we recommend consulting with a qualified attorney and/or tax professional. To discuss your estate plan or charitable giving options, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation.
[As with all our posts, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]