Some tax breaks aren’t worth the hassle of pursuing them, however, today’s example is definitely worth the hassle!

If you are charitably minded you’ll want to listen to learn about the advantages of making qualified charitable distributions. Discover how to increase your standard deduction while enjoying charitable tax benefits.

Stick around for the listener question to hear a great way to start practicing spending your money when you have been over-flexing your savings muscle.

Outline of This Episode

  • [2:22] The power of qualified charitable distributions
  • [5:56] How IRMAA thresholds work
  • [7:27] Three key takeaways
  • [12:41] How to convince your spouse that you have enough money to retire

The tax laws took the tax benefits away from charitable contributions

In 2017, the tax laws changed drastically. Many Americans were used to the tax breaks from charitable donations and were now faced with a larger standard deduction instead. The good news is that if you are over 70 ½ you can enjoy a larger standard deduction while also reaping the charitable tax benefits through qualified charitable distributions (QCDs).

Despite the potential advantages, many retirees are deterred from using QCDs due to their perceived complexity. QCDs involve several steps, including tracking donations and navigating tax returns. As a result, some retirees opt not to utilize QCDs.

Benefits of QCDs

The benefits of QCDs can be significant, especially in preventing an increase in Adjusted Gross Income (AGI) which determines your IRMAA Medicare surcharges. Since IRMAA is a tax cliff, QCDs can reduce your AGI so you don’t fly over the cliff.

Another way to benefit from QCDs is by using them toward your required minimum distribution (RMD). If you are required to withdraw more money than you need from your IRA, QCDs can be a part of these withdrawals and reduce your taxable income.

3 QCD takeaways

  1. Leverage QCDs for tax benefits – By donating funds directly from your IRA to charities you can take advantage of a larger standard deduction while benefitting from charitable tax breaks. This will help you reduce your taxable income and potentially lower your tax liability.
  2. Consider the complexity – While QCDs offer valuable tax benefits, they are complicated to implement. You need to be prepared for the additional steps in the gifting process. Working with a financial advisor can help you navigate the challenges.
  3. Plan ahead and start early – Plan to make your QCDs in January if possible. This will give you time to address any potential issues during the process.

Learn how to convince your hesitant spouse to retire and start spending money. Our listener question is from someone who is beyond ready to retire but whose spouse is still hesitant. Listen in to hear my tips.

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