Well, they are back in 2021! And if you’re 72 or older, this matters to you.
The CARES Act eliminated RMDs in 2020, but if taxpayers age 72 or older fail to take their distribution this year, there is a huge penalty – 50%! And in 2021, if you did not take a distribution in 2020, your IRA will have more assets in it, so your RMD will be higher than it would have been before.
RMDs can raise your tax bracket, that’s true. But the IRS offers you a chance to benefit charities close to your heart while securing tax savings before the end of the year using those funds that are required to be drawn from your IRA.
QCDs – Qualified Charitable Deductions – to the rescue!
A QCD is a direct transfer of funds from your IRA custodian, payable to your favorite qualified charity. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met (your tax advisor will know those simple rules).
In addition to the benefits of giving to charity, a QCD excludes the amount donated from your taxable income, which is unlike regular withdrawals from an IRA. Keeping your taxable income lower may reduce the impact to certain tax credits and deductions, including Social Security and Medicare.
Also, QCDs don’t require that you itemize, which due to recent tax law changes, means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.
This is the perfect time for checking with your tax advisor if you are 72 or older to see if making a donation from your IRA will assist you in tax savings this year and allow you to make a significant contribution to causes close to your heart.
I’m here to help, too. Please call if you would like to know more about RMDs and QCDs and how they can work to save the lives of lost, stray, abandoned, neglected, and abused animals coming to Humane Society Naples for comfort and care.
Senior Philanthropy Officer
Humane Society Naples
Kim Hanson just recently joined HSN’s Community Affairs team as Senior Philanthropy Officer. With more than 45 years in the nonprofit development field, Kim had served for the past 7 years as the Major & Planned Giving Officer for Peggy Adams Animal Rescue League in Palm Beach County. She will be posting a monthly blog on our HSN website about ways of saving the precious lives entrusted to us through a variety of charitable giving vehicles.