12/24/2018

Not Your Typical December 31 Message

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This is not your typical “Don’t forget to complete your charitable contributions by December 31” message.
 
Waiting until the next calendar year may be a better strategy for some IRA charitable distributions. When is this the case? When an individual has already satisfied RMD for the current year. 
 
For persons 70½ and over, the first dollars distributed from the IRA count toward the annual RMD. An IRA charitable distribution likewise counts toward the RMD and reduces the amount of the IRA owner’s taxable income. However, if the owner has already received the full RMD for the year, then all of that RMD will be taxable; subsequent IRA charitable distributions cannot offset the prior taxable distributions. In this case the IRA charitable distribution will not yield the maximum tax savings – it won’t count toward income, but it also won’t reduce taxable income already received.

Accordingly, an IRA owner who wants to use the IRA for charity but who already met RMD, may want to make the charitable distribution after December 31. This way the charitable distribution will certainly count toward RMD and reduce taxable income. The owner will then have the rest of the year to decide whether to take taxable distributions or make additional charitable distributions. 
 
Best wishes for a successful final week of 2018!

For more information contact Matthew Kaliff at mkaliff@jcfcleve.org or 216-593-2831.

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