General Rule regarding Charitable Deductions
We mentioned in a previous article that under the current US tax law, in order to specifically benefit from charitable donations and other itemized deductions which a taxpayer expends during the year, the total of those expenditures must generally exceed the standard deduction which every taxpayer is entitled to. In general, these thresholds are $12,550 for taxpayers filing as single or married filing separately; $18,800 for those filing as Head of Household; and $25,100 for married taxpayers filing jointly.
In describing tax concepts, we often use the term “generally”, because tax law has numerous exceptions to general rules which are often beyond the parameters of the subject being discussed. Here is a specific exception to the rule that in order to benefit from a large charitable contribution, one must essentially “give up” the standard deduction
Special Rule for Qualified Charitable Distributions
A Qualified Charitable Distribution (QCD) is a nontaxable distribution made directly by the trustee of your IRA (which must be other than a SEP or a Simple IRA) to a tax-exempt organization, i.e. a 501c(3) or similar organization that is eligible to receive tax-deductible contributions, Note that the contribution must meet the requirements that would enable it to be claimed as a deduction if it were a cash donation.
Other important points to note are that the donor must be at least age 70½ on the date of the distribution, and that the maximum annual exclusion for QCDs is $100,000 per donor, meaning that the spouse, who is age 70½, can also exclude up to $100,000 from an IRA in the same tax year. And a QCD will count towards each taxpayer’s Required Minimum Distribution (RMD) for the year, up to $100,000 of the RMD. And just beware of a potential reduction of the QCD exclusion related to certain previously deductible IRA contributions.
In the event a taxpayer takes additional taxable distributions during the year from the IRA, the 1099R will reflect the Gross (I.e. total) Distributions from the IRA, which will include the QCD amount, and the Taxable Amount will exclude the QCD (up to $100,000.) And again, since this distribution is excluded from taxable income and is not an itemized charitable deduction, the taxpayer(s) is (are) still entitled to the full standard deduction.
