ARE YOU OVER 70 ½ AND MAKING CHARITABLE DONATIONS?

Because of the recent tax law changes, a large majority of Americans will use the standard deduction for 2019, instead of itemizing.  However, if you are still charitably inclined and over age 70 ½ there is another way to continue your donations and reduce your tax bill.  It’s called a Qualified Charitable Distribution (QCD).  For individuals age 70 ½ or older, you can exclude up to \$100,000 from your gross income per year in IRA distributions if it is contributed to a qualified charity.  This amount would satisfy your RMD requirement WITHOUT causing the money to be taxed.

Here’s an example of how this works:

A married couple, filing jointly, has income of \$120,000 and an RMD of \$20,000.  Their charitable contributions are \$12,000 for the year.  They have \$6,000 of other itemized deductions.

SCENARIO A:  Take the RMD of \$20,000 (added to gross income) and donate \$12,000

Deductions = \$6,000 + \$12,000 = \$18,000 ** Because this is less than the standard deduction of \$24,000 they would take the standard deduction

Total Gross Income = \$140,000

Total Taxable Income = \$116,000 (\$140,000 – \$24,000 standard deduction)

SCENARIO B:  Make a QCD of \$12,000 from the RMD to a qualified charity and take the remaining \$8,000 of RMD as income

Deductions = \$6,000 ** Because this is less than the standard deduction of \$24,000 they would take the standard deduction

Total Gross Income = \$128,000 (\$140,000 – \$12,000 QCD gets deducted right from gross income)

Total Taxable Income = \$104,000 (\$128,000 gross income – \$24,000 standard deduction)

The tax savings from Scenario A vs Scenario B is \$7,000!

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Capital Wealth Investments is a full service Financial and Investment Company serving clients throughout the United States. We clear through Charles Schwab Investment Company, and have served the needs of people. We have combined experience of 50 years, and specialize in many areas. We will analyze your situation, and recommend the best solution for your needs. Give us a call today!

Juan Alvarez, Director of Sales

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