Giving Tuesday was created in 2012 by the 92nd Street Y and United Nations Foundation as a “Global Day of Giving”.  By designating the Tuesday after Thanksgiving as Giving Tuesday, organizers desired to establish a day focused on celebrating the generosity of giving, a great American tradition.  In light of the giving season, this article focuses on a tax-efficient way that individuals who are 70 ½ or older can use an IRA for charitable giving.

While the United States has a long history of encouraging charitable giving through tax legislation, the 2017 Tax Cuts and Jobs Act reduced the number of people who will be able to deduct charitable contributions for 2018.  This change resulted from the increase in standard deduction which eliminated tax benefits of charitable giving for individuals who are no longer able to itemize.  While the new tax law reduced the number of people who can itemize deductions, there are several financial planning strategies that can offer tax benefits for many individuals in their charitable giving.

Individuals receiving required minimum distributions (“RMDs”) from an IRA and are interested in giving to charity should consider using qualified charitable distributions (“QCD”) to satisfy all or part of their annual RMD.  Using QCDs for charitable giving can provide benefits for individuals who are taking the standard deduction as well as many who are still able to itemize deductions.

A large number of people are missing out on this valuable tax break, and time is limited to take advantage of this strategy for 2018 since the deadline is December 31st.

Important Information about Qualified Charitable Distributions

Conclusion

In addition to QCDs, individuals should consider other tax-smart giving strategies under the new tax law and leverage the impact of their philanthropy.  Qualified financial planning professionals can review potential strategies to help families maximize tax benefits of their charitable giving and develop an individualized financial plan to support their favorite charities and create an enduring legacy.

The information contained in this article is general and should not be considered legal or tax advice.  Consult with an appropriate professional regarding your circumstance.