The 2017 Tax Reform came with a surprise for many taxpayers - the standard deduction is now higher than their itemized deductions, particularly if they don't have significant mortgage interest. This simplifies filing and provides a larger deduction for many taxpayers - particularly those that are retired.
This news is often followed by "but that means I can't use my charitable deductions"!! That is true, because the larger standard deduction is designed to replace the deductions that you have historically used.
Fortunately, there is another method of using those charitable deductions if you have reached the age when you are taking Required Minimum Distributions (RMD) from your IRA accounts. If you are over 70 1/2 you may use all or part of your RMD to fulfill your charitable pledges. The payments to the charity are deducted directly from the taxable portion of your IRA distribution, so you receive the benefit of the deduction (in addition to your higher standard deduction).
These distributions are termed Qualified Charitable Distributions (QCD). Your investment firm can assist in making the distribution correctly - most investment firms have a special form for this distribution. You must be certain that the distribution is made directly to an approved 501 (c) 3 charity. The distribution cannot be made to you and then donated. You must obtain a receipt from the charitable organization indicating that no goods or services were received in exchange for the donation. We recommend providing the charity a copy of the distribution form so that they will be expecting the donation and have your information to complete the receipt.
At tax time, you will receive a Form 1099-R that will include both your QCD distributions and any normal RMD distributions that you received during the year. So, be sure to make your CPA aware of the QCD so that it can be correctly deducted from the taxable portion of your IRA distribution.
As always, we look forward to assisting with any questions that you have.