Hi, this is Dave Zaegel.
I wanted to send a quick note about charitable contributions and a particular strategy that can be helpful.
As I’m shooting this video, it’s shortly after Thanksgiving and we’re coming up on the other holidays of the season.
So, this is a time of the year that is particularly focused on giving and giving back to those who are less fortunate.
One way to do so, which can be very beneficial from a tax perspective, is if you are old enough, if you are retired, and you are required to make minimum distributions from an IRA account, you can have those distributions go directly from your IRA to a charitable organization.
So, why is this important?
Why does that matter ’cause you can make a donation to a charity and get a deduction on your tax return?
The difference here is oftentimes people will take the income in and then make a separate distribution to a charity.
So, what you have is you have income on your tax return and then a deduction on Schedule A of the tax return.
The difference with taking it directly from your required minimum distribution and having the investment company send it to the charity is that it never hits income and that’s a big difference because it lowers the income on your tax return and allows you then to potentially take other deductions that may have either been phased out or capped by your income.
Also, by having that lower income, you may be able to decrease what you pay for Medicare.
A lot of people don’t realize that what you pay for Medicare is based upon your taxable income, specifically your adjusted gross income.
So, by taking that money directly from your IRA over to a charity and not having it hit income on your tax return, you’re actually reducing your income allowing you to take more deductions and also potentially reduce your Medicare premium.
So, I hope this helps.
I know it doesn’t apply to everybody, but even if you’re not there yet at that point in life, maybe you know somebody who is, and especially if you’re already donating money anyway, there’s no good reason not to have it come directly from your required IRA distribution over to the charity ’cause you get a lot of tax benefits out of that.
So, I hope this helps.
If you have questions, reach out to me or leave a comment in the comments section below and I’m happy to help answer any questions you have.
Thanks, take care.
