A Great Way for Seniors to Get a Tax Break on Charitable Giving
Many charitable givers itemize their deductions on their federal income taxes to lower their tax bill. Charitable donations allow a partial deduction from income so that a person is taxed less. For those who are at least 70 ½ years old and have retirement investment accounts such as a traditional IRA, there is a potentially better tax savings available.
After age 70 ½ it is required that these investors take required minimum distributions (RMD’s) from their funds and these are taxed as income. Another option is to have the mutual fund company directly pay some or all of the RMD to a qualified 501(c)3 charity (such as Saints Dennis and Joseph Catholic Academy). Doing so will allow you to avoid paying federal income taxes on the transaction. This could offer you tax advantages over a deduction since the money does not then appear in your adjusted gross income. This is called a “qualified charitable distribution” (QCD). If you are age 70 ½ or older and have retirement income from an IRA, the QCD could be your most tax effective way to donate to worthy causes.
As with any tax decisions, be sure to consult with a tax professional, and be sure to ask about how the QCD can leverage a better tax bill for you while supporting the mission of Catholic Education here at Saints Dennis and Joseph Catholic Academy!
