Tax savings after 70

The Congressional Joint Committee on Taxation estimates that almost 90% of taxpayers will use the standard deduction when they file their taxes this April 15thdue to the increased standard deduction resulting from the Tax Cuts and Jobs Act of 2017.  This leaves many concerned that they will no longer be able to get the tax benefit from charitable contributions, which are only counted when you itemize your deductions.

For taxpayers over age 70 taking Required Minimum Distributions(RMDs) from their IRAs, they can direct some or all of their RMD to a charity, called a Qualified Charitable Distribution (QCD), therefore reducing their tax liability from the donation, while still taking the full standard deduction.

Here’s an example of what that could look like:

Let’s say a person has $100,000 of annual income, of which, $15,000 is from the RMD from their IRAs. They typically donate $10,000 per year to charity.  In 2018, they processed a $10,000 QCD to their state association of the Deaf and took the remaining $5000 of their RMD in cash.

Old tax law:

$100,000 income
-$4050 personal exemption (no longer applies in 2018)
– $10,000 itemized deduction from charitable contributions
$85,950 taxable income

New tax law:

$90,000 income (the $10,000 QCD never gets reported to the IRS as income)
-$12,000 standard deduction
$78,000 taxable income

$7950 less taxable income to report

In order for the donated funds to be exempt from taxation, they mustbe distributed directly from the IRA custodian to the charity through a QCD.  The IRA owner can not take receipt of the funds and then forward the donation on his/her own.  Work with your financial advisor or IRA custodian to ensure the process is done in compliance with IRS rules.  As always, consult with your tax advisor to see how your personal taxes will be affected by the new tax laws.

Adrianna Environmental B&W

Adrianna Rocha

Client Relations Representative

240-379-6929 V
240-439-6889 VP
512-379-6909 FAX

Adrianna Rocha joined Kramer Wealth Managers in 2021.

Adrianna is responsible for client experiences and service. As part of the customer service team, she strives to help and provide top-notch service to our clients. As part of her role, she communicates with clients through videophone, schedules client meetings, prepares and processes forms, and gathers information for our advisors.

My clients’ accomplishments are also my own. 

Adrianna Rocha graduated with a Bachelor of Arts in Communication Studies from Gallaudet University in 2017. Before she joined our team, she worked in the customer service industry for nearly a decade. She excels in human-to-human relations and takes pride in not only her own accomplishments, but her clients’ as well. Adrianna enjoys chatting about her slight obsession with dogs, houseplants, essential oils, and food: especially Mexican food! She is also a proud fur-mama to her beautiful Aussie-mixed pup, Ziva.

Adrianna is not registered with FSC Securities Corporation.