CALENDAR & COMMUNICATION

Guarantee Your Charitable Contributions Are Tax Deductible

Dave Scheer, Treasurer

Taxpayers have long been able to deduct their charitable donations from their taxable
income through their Itemized Deductions when they file their tax return. This allowed
for the taxpayer to include these donations with other items like property taxes, interest,
medical expenses, etc. There were limitations on the amounts you could deduct and
the taxpayer would deduct from taxable income the amount of these expenses over the
Standard Deduction for that tax year. With the tax code changes that went into effect in
2018 the Standard Deduction was increased and resulted in many taxpayers not being
able to deduct any of the expenses mentioned above.

For those taxpayers over 70 1/2 years of age, there is still a way to deduct 100% of their
charitable contributions. The taxpayer can donate directly to the charity from their IRA
with a donation called the Qualified Charitable Donation (QCD). The QCD allows the
taxpayer to direct the trustee of their IRA to send funds to the charity they designate and
this amount will be not be included in the taxable income when they file their tax return.
The amount of the donation is removed from taxable income so it is donated and 100%
deducted from income. Important: The taxpayer must have their trustee direct the
funds to the charitable organization to qualify. If the taxpayer receives the distribution
and sends a donation, it does not qualify as a QCD.

Another opportunity for donations uses this QCD in connection with the taxpayer’s
distributions from their IRAs that are required. If a taxpayer reaches a certain age,
currently 73, they are required to take a calculated distribution from their retirement
accounts by law. This is referred to as a Required Minimum Distribution (RMD). The
RMD calculates the amount that the taxpayer has to take from their retirement accounts
and this will be included in their taxable income for the year of the distribution. The
taxpayer can elect to use the QCD for all or a portion of the RMD and reduce the
taxable income resulting from this required distribution. This can be a valuable option
when the RMD will result in income that is not wanted in a tax year. As stated above
the taxpayer must have their trustee direct the funds to the charitable organization to
qualify.

These are options allowed to reduce your taxable income and still send funds to the
charity you want to support, i.e. Barnabas Community. If you are going to donate to a
charity why not remove the donation from your taxable income with this tool. If you take
a distribution from your IRA and write a check you probably will not be able to deduct
the donation, but if you use the QCD it is 100% removed from your income. Always
review your options with your financial advisor and/or tax professional for your specific
situation.