Charitable Giving is the Key to Unlocking Potential Tax Deductions in Retirement
 6/30/2017

Leaving a legacy may not be something on your mind just yet, but if you are near retirement or already enjoying retirement, then there are some unique estate planning tax strategies related to charitable giving that could help you lower your tax liability.

Often we look to charitable giving to reduce our income and pay less taxes, but in the retirement phase of life, there are fewer deductions related to mortgage payments and business expenses – the house is paid off and the business has been sold. Deductions are harder to find and many retirees stop itemizing deductions altogether.

However, a qualified charitable distribution from an IRA account to a non-profit can be a tax write off if done correctly. So what is a qualified charitable distribution?

Qualified Charitable Distributions Are Key

A qualified charitable distribution (QCD) is a distribution made from an IRA that allows for the taxpayer to lower their adjusted gross income and is even beneficial for those who do not itemize.

It is simple to make a qualified charitable distribution. The rules are:

  1. You must be over the age of 70 ½
  2. When making a QCD you must make the payment directly from the IRA to a qualified 501(c)3 organization
  3. You can make a lifetime donation up to $100,000 per year from your IRA
  4. The donation counts towards your required minimum distribution (RMD), so there is no need to take the RMD, and pay tax

If a nonprofit organization approaches you to make a donation and you are over 70 ½ years old, you will not receive any tax benefits for your donation unless you follow the above process to donate through your IRA account. Contributing to a fundraising effort through your regular checking or savings account will not count as a qualified charitable deduction.

It is key that you look for new ways to find tax deductions in retirement. Contact your CPA today about ways to reduce your 2017 tax liability through charitable giving. A trusted CPA can unlock potential tax savings, alongside your attorney and investment advisor.

Scott Taylor, CPA is on the Vegas PBS Advisory Board and is a Shareholder with Piercy Bowler Taylor & Kern, the largest locally-owned accounting firm in Las Vegas, now with offices in Reno and Salt Lake City. Although he is a BYU grad, he cheers for his hometown Runnin’ Rebels and has had season tickets for the past 40 years. Contact Scott at staylor@pbtk.com with any questions about tax planning or preparation strategies.