It’s not all doom and gloom after the Tax Cuts and Jobs Act of 2017, which curtails charitable deductions, eliminates personal exemptions and limits the deduction of local property taxes and state taxes. Taxpayers with IRAs who are over 70 ½ have an opportunity to gain a tax break this year, and their favorite charities can benefit as well. If you are thinking about doing a IRA Qualified Charitable Distribution (IRAQCD) for 2018, time to do so is now! Many people are going to be missing out on this valuable tax break- the deadline is December 31, 2018. If you are both taking required minimum distributions (RMDs) from your IRA and giving to charity in 2018, a IRAQCD is something you should consider.
This is what you should know about 2018 IRAQCDs:
1. Tax reform makes IRAQCDs more valuable than ever in 2018. You may be one of the many taxpayers forced to take the standard deduction for 2018, which eliminates your tax deduction for charitable gifts because you will not be itemizing. A IRAQCD is a way to remedy this situation by giving you a charitable contributions tax break.
2. A IRAQCD can add to the standard deduction. It allows the donations you made from your IRA to charity to be excluded from your income, which lowers your adjusted gross income.
3. You can do a IRAQCD if you are an IRA owner or beneficiary and you are 70 ½ years old or older.
4. Your IRAQCD must be done as a direct transfer from the IRA to the charity. If a distribution is paid to you, you cannot give the funds to the charity. However, a check made payable to the charity that is mailed to you and delivered by you to the charity will work as a IRAQCD.
5. You cannot receive anything in return for the donation. No free tickets, tote bags or mugs are allowed. Gifts to donor advised funds or private foundations do not qualify as a IRAQCD
6. The per-year limit is $100,000 per person. If you are married, and you and your spouse both qualify, you can each do a IRAQCD of $100,000 annually.
7. The amount transferred from your IRA to charity as a IRAQCD counts toward your 2018 RMD.
8. You can do a IRAQCD from your IRA, Roth IRA or inactive SEP or SIMPLE IRA. IRAQCDs are not available from any employer plans.
9. IRAQCDs apply only to taxable amounts in your IRA.
10. Alert your tax preparer that you are doing a IRAQCD for 2018. The 2018 Form 1099-R that the IRA custodian will send to you will not have any information indicating that a IRAQCD has been done for the year. That means that it could easily be missed by your tax preparer. Avoid this mistake by being sure your tax preparer is aware of the transaction.