Quarterly Tax Update – Charitable Giving & Tax Implications

By: Natalie C. Schuler, CPA, CFP^®, Tax Advisor

Many of us give back to the community with monetary donations to charitable organizations.  For those individuals that are taking required minimum distributions, one of the best ways to gift to charities is directly through your individual retirement accounts (IRAs).  These donations are called Qualified Charitable Distributions (QCD). A QCD is a nontaxable distribution from an IRA directly to an eligible charity. You must be at least 70.5 years old to take advantage of the QCD strategy. For taxpayers who have reached age 72, the QCD can be used as part or all of your RMD, removing the otherwise taxable RMD from your income.  A maximum amount of $100,000 per year is allowable as a QCD.   If you are charitably minded and have RMDs, this is one of the most tax efficient ways to give to charity.  

It is important to note that qualified charitable distributions are not reported to the IRS.  In fact, the Form 1099-R will show the entire amount of your distribution as taxable, even if some or all of what was a QCD.  The Form 1099-R reports the gross and taxable distributions from retirement accounts, such as IRAs.  To claim a QCD on your tax return, reduce the taxable distribution by the QCD amount and note the QCD on page 1 the 1040.  QCDs are not included as charitable contributions on the itemized deduction schedule.  It is important to make your tax preparer aware of any QCDs made during the year as these can often be missed, resulting in a less favorable tax result.  

We are always here to help you navigate charitable giving, tax advice and tax preparation so you are confidently making the best decisions possible. Reach out to us anytime with questions or for guidance.

^{IMPORTANT DISCLOSURE INFORMATION}

^{MCF Advisors, LLC (“MCF”) is an SEC-registered investment adviser. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this presentation will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from MCF.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed herein to his/her/its individual situation, he/she/it is encouraged to consult with the professional advisor of his/her/its choosing.   MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are an MCF client, please remember to contact MCF in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing / evaluating / revising our previous recommendations and/or services.}