• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Masters Advisors

  • About Us
  • Our Approach
  • Our Services
  • Corporate
  • Blog
  • Contact
  • Client Log-in
Client Log-in Contact Us

The Master’s Minute

Helpful Tools and Tips

Charitable Giving with RMDs

January 15, 2019 by Robert B. Miller

Once you reach age 70½, Uncle Sam wants you to start paying taxes on at least a portion of your IRA or 401k balance. He gets you to do that by requiring you to withdraw a percentage of money from your tax-deferred account, and every dollar that you withdraw from your IRA or 401k is taxed as ordinary income. The minimum amount that you must withdraw each year is not surprisingly called the Required Minimum Distribution (RMD). Those who don’t take the required minimum distribution are assessed a 50% excess accumulation penalty on the amount they should have withdrawn.

The new tax laws have significantly limited your ability to itemize deductions. For years you listed your gifts to ministries and charities on Schedule A of Form 1040 and received deductions that helped reduce your taxes. You gave, not to receive a tax deduction, but because you wanted to give. No doubt, you will continue to give even if your giving does not provide any tax benefit. (Now that the standard deduction is $24,000 for married couples under age 65 filing jointly and $26,600 for married couples age 65 and older filing jointly, most of us will not itemize deductions.)

One tax advantage does remain for those of you with charitable intent, provided you attain at least age 70½ this year and you own an IRA or a 401k. If you do not take constructive receipt of your required minimum distribution but send it directly to charity, you will not be taxed on the distribution.

Let’s say, for example, you have determined to give $12,000 to your church this year, and the RMD for your IRA is also $12,000. If you instruct the custodian of your IRA to send $12,000 directly to your church instead of to you, your RMD will be excluded from your income, and you will not pay taxes on this amount. Generally speaking, if you are in the 22% tax bracket, you would save $2,640 in taxes.*

Some of our clients are already employing this tax strategy known as a Qualified Charitable Distributions (QCD). Remember, you need to be at least age 70½ this year and you need to own an IRA or a 401k. If you meet these two requirements and are not using this strategy, we would encourage you to talk with your advisor at Master’s. He can help you get started.

Let’s continue to give generously, “not reluctantly or out of compulsion” but out of a heart of gratitude. If the IRS wants to reward generosity, let’s be thankful for that as well!

*Other factors can influence the amount of tax savings. You should seek professional tax advice to see how this will impact your specific situation.

Filed Under: Blog, Financial Planning, Strategy

Primary Sidebar

Categories

  • Behavioral Finance
  • Blog
  • Client Service
  • Current Newsletters
  • Faith Integration
  • Financial Planning
  • General
  • Investing
  • Market + Industry
  • Master's Minute
  • Master's News
  • Personal Development
  • Strategy
  • What's the Point?

Search Blog

Archives

Footer

Receive Master’s Minute Blog Articles Today

  • This field is for validation purposes and should be left unchanged.

480 New Holland Ave
Suite 7201
Lancaster, PA 17602

  • 
  • 

Contact Us

Albridge log in | Client log in

© 2023 Master’s Advisors • Developed by TinyFrog • Important Disclosures | Privacy Policy

Securities offered through Securities America Inc., member FINRA/SIPC. Master's Advisors is not affiliated with the Securities America companies. Advisory services offered through Securities America Advisors, Inc. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. This communication is strictly intended for individuals residing in the states of CO, DE, FL, IL, IN, KY, MD, ME, NC, NE, NJ, OH, OK, PA, SC, TN, TX, VA, VT, WV, WY. No offers may be made or accepted from any resident outside the specific state(s) referenced. PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. The company is not liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third party technologies,  websites, information, and programs made available through this website. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the websites you are linking to. All images and Content Copyright © 2020 Masters Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore it is important to coordinate with your tax or legal advisor regarding your specific situation.

Securities America Form CRS

Check the background of this firm on FINRA's BrokerCheck.