Important Charitable Giving Rules Made Permanent

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Financial Strategies Group provides information on how recent legislation (The Protecting Americans from Tax Hike (PATH) act of 2015) makes the Qualified Charitable Distributions (QCD) provision permanent, how this effects taxpayers, and how to capitalize on the provision.

The Protecting Americans from Tax Hike (PATH) act of 2015 signed by President Obama on December 18th, 2015 makes the Qualified Charitable Distributions (QCD) provision permanent. The QDC allows for the tax free transfer of IRA assets to qualified charitable organizations as long as certain rules are followed. This provision was originally enacted in 2006 and has lapsed and been re-instated several times since then.

Here is how it works:
Once an individual is 70 ½ years old they are eligible to transfer up to $100,000 per year from their Traditional IRA to a qualified charity. Distributions from Traditional IRAs are typically taxable but when the QCD provisions are met this transfer is tax free. In addition, this transfer counts towards and can satisfy the Required Minimum Distributions (RMD) that an IRA owner is required to take once they are 70 ½ years old.

An Increase in taxable income can cause Social Security benefits to become taxable, disqualify a taxpayer from important tax credits or deductions, and/or reduce or eliminate eligibility for government benefits. Qualified Charitable Distributions can be a great way for investors to satisfy their Required Minimum Distributions without increasing their taxable income and of course the overarching benefit of helping out your favorite charity.

As with any tax strategy there are advantages and disadvantages. The details of your particular situation should be discussed with your financial and tax advisor prior to the use of QCDs. Additional, details on the rules surrounding QCDs are below:

  • QCDs must be taken from a traditional or Roth IRA and are limited to the amount that would otherwise be included in income
  • Distributions from an on-going Simplified Employee Pension (SEP) or Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA are not eligible to be a QCD
  • Distribution must be made directly to the qualified charitable organization
  • If done by check, the check must be made payable to the qualified charitable organization
  • The individual maintains acknowledgement of the contribution

To contact the author or for more information on financial planning topics visit http://www.fsgmichigan.com

Brandon E. Carter, CFP®, ChFC®, AEP®, MSFS, Financial Adviser*
2270 Jolly Oak Rd. Suite 2
Okemos, MI 48864
(517) 347-4337
bcarter(at)ft(dot)nyl(dot)com

Brandon E. Carter, CFP®, ChFC®, AEP®, MSFS Financial Strategies Group, Inc. Brandon E. Carter is a Financial adviser offering investment advisory services through Eagle Strategies LLC, a Registered Investment Adviser. Brandon E. Carter is also a Registered Representative offering Securities through NYLIFE Securities LLC, Member FINRA/SIPC, a Licensed Insurance Agency
*Neither Eagle Strategies LLC, nor its financial advisers, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.
Financial Strategies LLC is not owned or operated by Eagle Strategies LLC or its affiliates.

Note, for plans and arrangements subject to ERISA, the U.S. Department of Labor proposed new regulations in April 2015 that, if adopted as proposed, would significantly expand the definition of “investment advice”, and therefore broaden the circumstances in which a broker and/or its registered representative could become a fiduciary under ERISA, including with respect to plan rollovers to IRAs and distributions from a plan or IRA. These rules will increase fiduciary obligations to plans and IRAs and include extensive disclosure and other requirements. As a result, the rules applicable to the sales of products to ERISA plans and IRAs may change.
SMRU 1688113 EXP 3/28/17

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Brandon Carter, CFP, ChFC, AEP, MSFS
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