Americans are the most generous people on Earth, according to the Philanthropy Round Table1. We charitably provide funding for education, health, the arts, nature, religion, social services and other worthy endeavors. And we give larger fractions of our incomes than residents of any other land.
Some ways to give work better than others, financially speaking. Since our object is to do what we can to improve your financial position, here are some things we want you to know:
1. You may direct IRA distributions to go straight to charities. You do not pay tax on these distributions, unlike the ones that go in your pocket. The Internal Revenue Service calls these QCD’s, or Qualified Charitable Distributions. These may be used to satisfy all or part of any money you have to take out—the RMD or Required Minimum Distribution for those over 70. (The IRS loves acronyms!) Even if you don’t itemize on your taxes, this is a way to reduce income taxes you would otherwise have to pay.
2. If you own a stock that has gone up in value, you may donate the stock and avoid tax on the gain. Additionally, you do receive an income tax deduction for the full value of the stock on the date it is transferred to the charity. This works out better than if you sold the stock, incur tax on the gains, and then donated the cash to the charity. Consult your tax expert about your situation.
3. If you plan to leave bequests to family members and a charity too, think about the best way to do that. Since charities don’t pay tax, there is no tax pain associated with money coming out of an IRA. Your heirs DO have to pay tax on IRA distributions, however. So you might make any charitable bequests by way of IRA beneficiary designations, and leave less taxing assets to other heirs. Consult your estate attorney for detailed information.
Clients, we are not in the business of telling you how to spend your money. But if you are charitably inclined and want to take advantage of any of these ideas, call or email us. We will work with your other advisors, do the paperwork for QCD’s from your IRA accounts here, assist with transfers to charities and help you change beneficiary designations on your IRA accounts.
Email us or call if you would like to discuss these ideas in more detail.
2IRS FAQ on charities and IRA withdrawals: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific situation with a qualified tax advisor.