Year-End Required Minimum Distribution Planning    Make An Impact With Your IRA

As we approach the close of 2019, it’s time to think about year-end RMDs.  We often get questions about the Tax Cuts and Jobs Act (TCJA) and how that affects clients, who in years past, were itemizing and making charitable contributions.  

The TCJA effectively doubled the standard deductions for all filing statuses beginning in 2018, subsequently, itemizing might be less advantageous for some.   For the average household income it will require a considerable increase in overall itemized deductions than in previous years to make itemizing worthwhile.

For those with an Individual Retirement Account (IRA), you might be able to explore another strategy to take advantage of potential tax savings. The IRS requires a traditional IRA account holder to begin taking an annual Required Minimum Distribution (RMD) when reaching age 70 ½, even if the money isn’t wanted or needed at that point in time.  These distributions are taxable at ordinary income tax rates based on the IRA owner’s current tax bracket.  

For those who have to take an RMD and are charitably inclined, the Qualified Charitable Distribution (QCD) could be attractive.  A qualified charitable distribution is a distribution from an IRA made directly to an eligible charity, bypassing the owner of the account. 

Qualified Charitable Distributions count toward the client’s required minimum distribution (or RMD) for the year and are not reported as income.  This could help the client to keep his/her adjusted gross income (AGI) and taxable income within a desired range.

There are a few rules that apply to QCDs from Traditional IRAs:

  • You must be at least 70 ½
  • The funds must be directly transferred from the IRA custodian to the eligible charity (as defined by the IRS)
  • Donor advised funds (DAF) are not permitted to receive QCDs
  • The maximum amount that can be donated through a QCD in 2019 is $100,000
  • If you are married, each spouse can donate up to $100,000, but you may not “share” the limit, meaning one spouse is not permitted to give more than $100,000 if the other gives less

If you are interested in this distribution strategy or have any questions, please reach out to us so we can discuss further with you.


This commentary was created by Black Diamond Planners and is for informational purposes only. The views expressed are based on current market conditions and are subject to change. There are no assurances that the techniques and strategies discussed herein are suitable for all investors or that the predicted results will occur. The commentary herein does not constitute investment advice, tax advice, or legal advice. Tax strategies should be discussed with a licensed accounting professional. All investments are subject to risk, and past performance is no guarantee of future results.