By Jeff Roth
It is not income tax season but this is a subject that anyone over 70 ½ may wish to consider. Starting in 2018, the standard deduction amounts are $12,000 for a single person and $24,000 for a married couple filing jointly. This means if you have deductions for taxes, medical and charitable donations that are less than those amounts, there is no need to save your receipts or itemize. The government will automatically allow these amounts to be deducted.
If you give your church $5,000 this year, you might want to quit giving each Sunday and have your IRA administrator write one check directly to your church out of your required minimum distribution. If you are in the 25 percent tax bracket you will save $1,250 in income tax. Even if it is only $500 you could save $125. It becomes a deduction in addition to the standard deductions the government is allowing. You have to take the required minimum distribution as income anyway so why pay tax on that amount and give a separate personal check to the church for which you will not get any credit.
This applies only to your traditional Individual Retirement Account. You need to be sure your IRA qualifies.
Bottom line you can make a charitable contribution, save income tax and satisfy your minimum distribution requirement. Don’t do this from this article but ask your tax preparer. You need to contact your IRA administrator and you also need to contact your charity so you have the exact name and verify that they qualify as a charity. The charity should also be put on notice that they will receive a check directly from a third-party source. The church may want to know why you quit giving on Sunday but they will be happy in the end. Before the end of the year you should get verification that the contribution was correctly made and credited to your account.
This procedure could change from year to year so be sure it is allowed for each tax year. You may give to several charities directly from your RMD and save tax dollars for personal use.
Jeff Roth is a partner with David Bacon and Jessica Moon of the firm Roth and Bacon with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Fla. All members of the firm are licensed in Ohio and Florida. Roth’s practice is limited to wealth strategy planning and elder law in both states. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to provide information to the public on concepts of law as they pertain to estate and business planning. Roth can be reached at firstname.lastname@example.org or 419-732-9994.