Sam Payne, RICP, CLTC – Vice President, Business Consultant
(Asset Marketing Systems)
As we quickly approach the end of one tax year and the beginning of another, a review of Qualified Charitable Distributions (QCDs) and their application for some of your clients makes perfect sense.
Referrals, the holy grail of any enterprise, are a by-product of providing exceptional service and value to your existing clients. So much so that they want to share you with their friends and acquaintances, and so you become referable.
Informing and educating clients who can take advantage of QCDs about them, and the benefit of doing so is one of those opportunities to add value.
What is a QCD? QCDs have been around in some form since the Pension Protection Act in 2006. Their value changed as a result of the Tax Cuts and Jobs Act of 2015, and under current tax law, they can provide an additional benefit for tax years through 2025. Prior to 2017, the QCDs strategic importance lay primarily in the fact that it could help older taxpayers meet their philanthropic goals while also satisfying IRA required minimum distributions (RMDs).
Since the passage of the Tax Cuts and Jobs Act and the increase in the standard deduction, many individuals find themselves in a position where total itemized deductions do not exceed the standard deduction. So deducting charitable contributions will not have the benefit it may have had previously.
Here’s an example:
For the 2019 tax year, a couple plans to file jointly. They are both age 75 and anticipate adjusted gross income (AGI) of $125,000, including $60,000 in RMDs.
$125,000 total income (including 60,000 RMD)
Standard deduction $27,000
Charitable gift $5,000
Taxable income $98,000 ($125,000 minus standard deduction)
If the QCD was utilized, the taxable income would be $93,000 saving approximately $1,300 in taxes.
Reach out to your Business Consultant for more information on QCDs, the rules and limitations…then start talking to your clients currently receiving RMDs. Are they giving to a charity annually, and are they utilizing the QCD? If not, show them how to!
To get more background on Qualified Charitable Distributions, watch the video below to hear Sam Payne discuss the history of QCDs along with a case study.