Are You Taking Advantage of Tax Breaks through Qualified Charitable Distributions?

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Everyone who is subject to Required Minimum Distributions who gives to a charity should use Qualified Charitable Distributions (QCDs), but must qualify by being age 70 ½ or over. Say for example you give $10,000 to your church or another non-profit organization on an annual basis. If you are taking RMDs, you can have your IRA custodian write a check payable to the charity and send it directly to the charity. In this case, $10,000 is excluded from your taxable income. It lowers you Adjusted Gross income (AGI). This is much better than a tax deduction!

The rules are as follows:

·         You must be age 70 ½ or older and have an IRA

·         The payment must go from your IRA custodian to the charity, or several charities

·         The first funds that come out of the IRA each year are the RMDs so you should consider making your donations early in the year

·         It is helpful for your financial advisor to send a letter to you, confirming the transaction, so you can provide the letter to your tax preparer

The benefits of QCDs:

·         QCDs satisfy your RMD

·         Keep you AGI lower – RMDs increase your tax bill where QCDs cut taxes since the RMD amount given to charity is excluded from income

·         Can increase medical deductions

·         Can lower Medicare premiums, in some cases substantially

·         Can benefit those who claim the standard deduction

·         Can benefit those who may have their charitable deduction limited

·         Will almost always save taxes – it will never raise taxes

·         Large allowable QCD limit – $100,000 per person, per year

Many federal employees keep funds in TSP after retirement because of the low fees of the index funds. The F, C, S, and I fund indexes are available outside of TSP and in some cases at a lower cost. Fidelity stock and bond index funds are the lowest costs index funds that I am aware of. However, there is no comparison to the G fund outside of TSP, so for those of you that have funds allocated to the G fund, you should leave those monies in the TSP G fund.

Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC Advisory services offered through J.W. Cole Advisors, Inc. (JWCA) FedSavvy Educational Solutions and JWC/JWCA are unaffiliated firms.