1 fiduciary

   noun               fi·du·cia·ry             \fə-ˈdü-shə-rē, -ˈdyü-, -shē-ˌer-ē\

  1. one often in a position of authority who obligates himself or herself to act on behalf of another (as in managing money or property) and assumes a duty to act in good faith and with care, candor, and loyalty in fulfilling the obligation.

Qualified Charitable Distributions

Taxpayers experienced the effects of the Tax Cuts and Job Act these past few months when it came time to file their tax returns. One of the biggest changes the legislation caused was the doubling of the standard deduction. Now, many are better off using the standard deduction and do not itemize their deductions unless they have excessive medical expenses or make large charitable contributions.

For those that file with a standard deduction, do not despair as there is another way to get a tax benefit with your charitable contributions. For retirement account owners that are over 70 ½, the government forces them to withdraw a portion of their IRA/401k account each year. Yet, the owner may donate all or a portion of their required minimum distribution (RMD) to charity. This is called a qualified charitable distribution or QCD. The benefit of a QCD is that the amount donated from the RMD is not counted as income so they do not owe taxes on that income amount. 

QCDs are great for those that like to give a few thousand dollars to charity and still wish to get a tax benefit from doing so.  We have had multiple clients that have done QCDs for their 2018 taxes and we expect more to do so for 2019.

To ensure you get the tax benefit from a QCD follow these rules:

  • The donation must be to a 501(c)(3) charitable organization.  You are obligated to research the organization, not the IRS.  You can search 501(c)(3) organizations on the IRS’s website.
  • You must be over 70 ½ (when required minimum distributions begin).
  • The donation must be made during the calendar year. Unlike IRA contributions, QCDs need to be made before December 31st of the tax year you are filing not April 15th.
  • The distribution must be sent directly to the charitable organization. You cannot take out the money and then write a check. Instruct the firm that manages your account to send the money directly.

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1 Source: http://www.merriam-webster.com/dictionary/fiduciary

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