Use your Required Minimum Distributions to Make Charitable Contributions
A client walks into our office and says, “I’m glad Congress raised the standard deduction but I’m not getting the benefit of a tax break anymore for giving to my church and I’d really like to keep making charitable contributions to them.” After handing him a cup of coffee, we smile a bit and tell him it doesn’t need to be that way because we have him covered. See, as CPAs, our job is to understand the tax laws so that we can help you save more money on your taxes. Are you in the same boat as our client? Well, it might just be time to step off that sinking ship and come by our office for a visit.
In case you missed the article, the standard deduction nearly doubled with the new tax law and you can either take the standard deduction or itemized deductions, whichever is greater. The good news is that if you want to make charitable contributions and have a traditional IRA, we have a great solution for you! A traditional IRA is taxed upon withdrawal (unlike a Roth IRA which is taxed upfront,) so if you must take a required minimum distribution each year (this applies if you are over the age of 70 1/2,) instead of having your broker or bank write a check to you, you can have them write it to the charity, which would make it non-taxable. How’s that for a tax benefit?
Each individual’s situation is different and should be considered holistically rather than using a fast, quick, and easy approach. It’s the difference between a restaurant and fast food; one offers quality at a higher price and the other offers speed at a lower cost. With your finances, however, it is often a wiser decision to go to the restaurant. Are you wondering if making a charitable contribution from your traditional IRA is a good idea? If so, please call our office at 813-514-8273 to schedule an appointment for an income tax projection.
For a few hundred dollars (we bill you for our time,) our tax professionals can estimate your tax liability and show whether or not it would be beneficial to make further charitable contributions. If you are interested in this service, please ensure you call us by the end of November so that if you decide to, you will have time to make those charitable contributions. If you come in after December 31, 2018, you will have missed the chance to change your tax liability and also to (potentially) save a lot of money for 2018.