With the new higher standard deductions, it has become difficult to itemize deductions for most taxpayers who historically have done so. Therefore, most taxpayers are receiving no benefit from charitable donations.
However, receiving a tax benefit from charitable donations is still available for those taxpayers who are 70 1/2 or older and who are receiving RMDs (Required Minimum Distributions) from their IRA accounts. To receive the tax benefit, the IRA recipient must have their IRA trustee write the check directly to the charity from the IRA account. By following this procedure, the IRA recipient will reduce the total IRA distributions by the charitable donations and only report the net of these two amounts as taxable IRA distributions. This, in effect, reduces the amount of AGI (Adjusted Gross Income), which reduces income taxes and can also potentially reduce the amount of taxable social security benefits, while potentially reducing the taxpayer’s Medicare premiums in future years.
Not a bad deal to reduce taxes AND give to charity. Questions? Contact us today!