Qualified Charitable Deductions can be advantageous for many looking to maximize deductions and fulfill charitable giving goals, but it is important to fully understand their regulations before deciding if this deduction is right for you.
A Qualified Charitable Deduction (QCD) occurs when a taxpayer has funds paid directly from their Individual Retirement Account (IRA) to a qualified public charity. QCDs, which can only be made from IRA accounts of taxpayers 70 ½ or older, can be made up to $100,000 for each qualifying taxpayer and their spouse. A taxpayer cannot use their pension plan to make QCDs, nor can a QCD be used to contribute to a donor advised funds or a a private foundation.
QCDs do not count as taxable income from the IRA but do reduce the otherwise required minimum distribution. This allows taxpayers to have lower adjusted gross income which may increase deductible medical expenses if they itemize their deductions. In other situations, the QCD allows the taxpayer to decrease their taxable income even if they do not itemize deductions. QCDs are also an effective way to receive a state tax benefit for taxpayers who live in gross income tax states like Connecticut and New Jersey.
Under the SECURE Act, taxpayers are no longer required to take their IRA required minimum distributions until they are 72. Being able to utilize the QCD at 70 ½ allows taxpayers to fulfill their charitable giving desires without creating income. Utilizing QCDs early is also a smart way to lower a taxpayer”™s potential taxable estate by decreasing the IRA value.
Keep in mind that the SECURE Act may limit the value of a QCD for any taxpayer over 70 ½ that continues to make tax deductible contributions to their IRA.
Citrin Cooperman is ready and able to assist you in navigating Qualified Charitable Deductions. To learn more about QCDs and if they are right for you, please reach out to Heather Oboda at hoboda@citrincooperman.com.
ABOUT THE AUTHOR
Heather Oboda is a tax partner with nearly two decades of experience in public accounting. With a focus in trust and estates, Heather provides tax, financial, estate, and succession planning. She specializes in coordinating family group returns, including their entities, trusts, and private foundations, in addition to their personal returns. Her clients include trusts and estates, high net worth individuals, and their closely held businesses. She is an active member of the firm”™s Trusts and Estates Practice.
ABOUT CITRIN COOPERMAN
“Citrin Cooperman” is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients”™ business needs. The two firms operate as separate legal entities in an alternative practice structure. Citrin Cooperman is one of the nation”™s largest professional services firms. Clients are in all business sectors and leverage a complete menu of service offerings. The entities include more than 200 partners and over 1,500 employees across the U.S.
