Donate to Your Favorite Charity Through Your IRA
The holiday season is the peak time for charitable giving. According to CNBC, in 2015, Americans gave a record $373.25 billion to charities. (We are all so generous!)
However, last December, Congress and President Obama made permanent a tax law on qualified charitable distributions (QCDs) that allows individuals 70 ½ or older to give directly from their IRAs rather than having to take a distribution that would trigger an income-tax bill. The rule allows taxpayers to save on taxes and, as a result, give more if they wanted. Because a QCD reduces income and is not an itemized deduction, it even benefits investors who do not itemize.
Previously, Congress extended this rule year by year, often waiting so late that givers were left in confusion. This year there is time to consider how giving from an IRA can reduce or eliminate the need to take the unpopular required minimum distribution (RMD) faced by investors 70 ½ or older.