For people aged 70 and a 1/2 or older and who are charitably minded, we can explore a Qualified Charitable Distribution, or QCD for short. Those who like to give to charities including their place of WORSHIP can make a direct transfer from their IRA to the charity, in ANY amount up to $100,000 a year. By doing this they can avoid adding the distribution to their Adjusted Gross Income which can reduce income taxes.
You can even make a QCD in PLACE OF your Required Minimum Distribution (RMD). Taking RMDs is something many of my clients disdain! They hate paying taxes on income they do not need – but are required to take.
As a holistic retirement income planner, I look at the BIG picture for my clients. And for those who do not need their RMD money to enjoy their retirement years (but have to take it per the IRS rules), this can be a tax-saving strategy. I seldom even see a CPA recommend this savvy financial move.
Rather than taking your IRA distribution directly, you have your custodian make a direct transfer to the qualifying charity (and not to you). Of course, the contribution to charity would have had to be entirely deductible if it were not made from an IRA (there can be NO benefit back to the taxpayer and charitable substantiation requirements apply as always.)
Of course, NO strategy works for everyone’s situation, but being alert to financial opportunities can SAVE my clients tax dollars and possibly reduce taxation of your Social Security checks or Medicare Parts B & D premiums too.
all the best… Mark