By Mike Safley | December 10, 2021

Before 2021 Ends, You Can Still Make a Charitable Impact

Are you looking for a way to help Quechua Benefit? This year there are several options to make end-of-year charitable contributions that give you a tax benefit! For additional information, see IRS Publication 526, Charitable Contributions.

CASH DONATIONS

According to the Wall Street Journal, “Congress has made two key changes to enhance tax breaks for giving during the pandemic that expire after this year. One allows millions of taxpayers who wouldn’t normally get a tax break for donations to deduct up to $300 per single filer and $600 per married couple filing jointly. The other allows a full deduction this year for donors making gifts up to 100% of their income, instead of a partial one.” (WSJ, “Making Year-End Donations? Get the Most Tax Bang for Your Charity Buck,” 12/10/21)

That means that even if you don’t itemize your tax return, you get a tax deduction for $600 contribution filing jointly and $300 filing as a single person.

QUALIFIED CHARITABLE DISTRIBUTION FROM YOUR IRA

You or someone you know may be eligible to make a qualified charitable distribution from an IRA.

This information is especially beneficial for people who are over 70.5 years old. When you reach 70.5 years of age, you must start taking Required Minimum Distributions from your IRA account. Most people who are age 70.5 are already drawing funds in retirement anyway, so they meet this requirement. But other people who don’t necessarily need the money are forced to take a certain percentage at this time. This is how the IRS makes you pay taxes on all that tax-deferred money you earned over your lifetime.

To put it very simply, this means that you can donate to any qualified 501(c)3 directly from your IRA and bypass paying taxes on that money. Yes, that’s right. You could give to your church or other local nonprofit and actually save money on taxes each year!

Here is an example:

Let’s say you are above age 70.5 and normally give $3,000 to a charity you love and tithe another $3,000 to your church. Instead of you writing them a check from your personal bank account, you have your IRA broker cut you a check from your IRA that’s written directly to each organization.

If you withdrew the same $6,000 from your IRA and made the donation, then you would pay taxes on that money.

If your taxes were 30% federal and 5% state, the total tax saving is $2,100 for your $6,000 donation!

You receive several benefits:

  1. The charitable contribution counts toward your required minimum distribution each year.
  2. Normally a withdrawal from your IRA would count as income, which could cause you to pay taxes on your Social Security and would count towards raising your Medicare premiums. You avoid this tax by simply having your plan administrator cut the check directly from your IRA.
  3. You also don’t need to worry about the adjusted gross income limitations for charitable donations each year.

Qualifying Requirements:

  1. You can’t give to a private (grant-making) foundation
  2. As stated above, you must be 70.5 years old.
  3. The charitable organization must give you proof of the contribution.
  4. These contributions must come from a traditional IRA.
  5. You are limited to $100,000 per year in contributions like this. But,
  6. The tax benefit is per person; so if you have a spouse with a traditional IRA you could potentially gift up to $200,000 between the two of you.

Would you like help with doing this for yourself or a family member?

Quechua Benefit is glad to help!

Contact Mike Safley (503) 703-6020 or Dale Cantwell (303) 902-4503 for more information.

Click here to read more about the benefits of QCD(s) and the rules that govern them. Your financial advisor can help you make your Qualified Charitable Distribution to Quechua Benefit. 100% of your donations directly impact the lives of families, women, and children in Peru.

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