Ever considered making a QCD of an RMD from your IRA? That’s not just a bunch of unintelligible alphabet soup. It’s a shortened description of a simple strategy that could reduce your tax burden while also enabling you to donate greater amounts to a church or charity.
Let’s define the terms. An IRA, of course, is an Individual Retirement Account. An RMD is an annual Required Minimum Distribution, an IRS-defined amount that must be withdrawn from a non-Roth IRA once the account owner reaches age 70½. (RMDs are mandated for certain other tax-deferred accounts as well.) And, finally, a QCD is a Qualified Charitable Distribution — money donated directly from an IRA account to a charity. This direct donation enables the account owner to avoid paying taxes on the RMD.
Qualified Charitable Distributions have been allowable since 2006. But the 2018 tax law, with its near doubling of the standard deduction, has made QCDs more attractive. Under the new law, fewer taxpayers have sufficient deductions (from charitable giving, mortgage interest, etc.) to make itemizing worthwhile, so QCDs have taken center stage as the means by which non-itemizers can still garner a tax benefit related to giving.
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