{"id":124274,"date":"2021-12-22T15:31:11","date_gmt":"2021-12-22T15:31:11","guid":{"rendered":"https:\/\/fin2me.com\/?p=124274"},"modified":"2021-12-22T15:31:11","modified_gmt":"2021-12-22T15:31:11","slug":"retirees-may-score-a-charitable-write-off-with-this-year-end-strategy","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/retirees-may-score-a-charitable-write-off-with-this-year-end-strategy\/","title":{"rendered":"Retirees may score a charitable write-off with this year-end strategy"},"content":{"rendered":"<ul>\n<li>Retirees eyeing a year-end charitable gift may still score a write-off with donations from their individual retirement account.\u00a0<\/li>\n<li>Investors age 70\u00bd and older may use qualified charitable distributions, or QCDs, to donate up to $100,000 per year. <\/li>\n<li>The transfers may count as required minimum distributions at age 72 and reduce income, satisfying other tax goals, financial experts say.<\/li>\n<\/ul>\n<p>&#x27;Tis the season for charitable giving, and retirees eyeing a year-end donation may still score a write-off with transfers from their individual retirement account.\u00a0\u00a0<\/p>\n<p>Qualified charitable distributions, or QCDs, are direct gifts from an IRA to an eligible charity. Investors age 70\u00bd and older may donate up to $100,000 per year, and it may count as their required minimum distribution once they turn 72.\u00a0\u00a0<\/p>\n<p>While the maneuver doesn&#x27;t provide a charitable deduction, donors may see other significant tax benefits, financial experts say.<\/p>\n<p><strong>More from Personal Finance:<\/strong><br \/>Americans gave $2.7 billion on &#x27;Giving Tuesday.&#x27; How to score a write-off<br \/>How to pick the best year-end charitable giving strategy<br \/>Here are must-know changes for the 2021 tax season<\/p>\n<p>&quot;For most people, most of the time, you&#x27;re going to be better off doing this as your first source of charitable giving,&quot; said certified financial planner David Foster, founder of Gateway Wealth Management in St. Louis.<\/p>\n<p>The primary benefit of a QCD is that the transfer doesn&#x27;t count as taxable income, he said.<\/p>\n<p>Since fewer Americans itemize deductions, it can be difficult to claim a write-off for charitable gifts. However, retirees taking the standard deduction may still benefit from a QCD because it won&#x27;t be part of their adjusted gross income, Foster said.<\/p>\n<p>Moreover, a QCD reduces their IRA balance, cutting the size of future required minimum distributions, he said.\u00a0\u00a0<\/p>\n<p>&quot;That&#x27;s a relatively small benefit for most people but still relevant,&quot; Foster added.<\/p>\n<h2>Perks of less adjusted gross income<\/h2>\n<p>While most people don&#x27;t make charitable donations solely because of the tax breaks, QCDs may offer a big one: reducing adjusted gross income.<\/p>\n<p>&quot;That&#x27;s important because [higher] adjusted gross income often triggers a lot of other tax ramifications,&quot; said JoAnn May, a CFP and CPA with Forest Asset Management in Berwyn, Illinois.<\/p>\n<p>For example, more adjusted gross income may cause a hike in monthly premiums for Medicare Part B and Part D, she said.<\/p>\n<p>The surcharge, known as the Income Related Monthly Adjustment Amount, or IRMAA, adds an extra fee for a year once income exceeds a certain level.<\/p>\n<p>&quot;IRMAA is a big issue with my retired clients,&quot; May said. &quot;They don&#x27;t like paying it.&quot;<\/p>\n<p>Another example is the medical expense write-off. Those who itemize deductions may claim a tax break for qualified expenses that exceed 7.5% of adjusted gross income. However, higher income creates a steeper hurdle to claim the deduction, she said.\u00a0<\/p>\n<h2>QCD missteps<\/h2>\n<p>One of the biggest issues with QCDs is that the transfers aren&#x27;t separate on\u00a0Form 1099-R, which reports retirement plan distributions to the IRS.\u00a0<\/p>\n<p>For example, if someone withdraws $50,000 in a year and $20,000 is for a QCD, the form will still report $50,000 in total distributions, even though only $30,000 is taxable income, Foster said.\u00a0<\/p>\n<p>&quot;It&#x27;s up to you to keep track of how much of that money went directly to charity,&quot; he said.\u00a0 \u00a0<\/p>\n<p>Additionally, the payment from the IRA must be made out to the charity. If someone writes a check from their IRA to a charity at the end of December, it must clear from their IRA by Dec. 31 to count for the year, May said.<\/p>\n<p>Retirees, however, may bypass the issue by having their custodian cut the check.<\/p>\n<p>Source: <a href=\"https:\/\/www.cnbc.com\/2021\/12\/22\/retirees-may-score-a-charitable-write-off-with-this-year-end-strategy.html\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Retirees eyeing a year-end charitable gift may still score a write-off with donations from their individual retirement account.\u00a0 Investors age 70\u00bd and older may use [&#8230;]<\/p>\n","protected":false},"author":3,"featured_media":124273,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Retirees may score a charitable write-off with this year-end strategy - 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