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  1. Qualified Charitable Distributions (QCDs) Changes in the new tax law (Tax Cuts and Jobs Act of 2017) means it’s less likely you can deduct donations to charity from your taxes. However, the federal government still allows for Qualified Charitable Distributions (QCDs). A QCD is a distribution of funds from your IRA account, payable to a qualified 501(c)(3) charity. If certain rules are met, QCDs can be counted toward satisfying your required minimum distribution (RMD). Benefits A QCD excludes the amount donated from taxable income, which is unlike regular withdrawals from an IRA. Keeping your taxable income lower may reduce the impact to certain tax credits and deductions, including Social Security and Medicare. Rules You must be 70½ or older The maximum annual amount that can qualify for a QCD is $100,000. IRA donations must go directly from the account to the charity. Typically the custodian submits them to the charity or else sends checks made out to the charity to the IRA owner, who sends them on. The distribution can't go to a private foundation nor a donor advised fund. Tax Tip You'll receive Form 1099-R reporting the distribution, but the form does not specify that it was a tax-free transfer to charity. If you work with a tax preparer, it's important to let him or her know that it was a qualified charitable distribution so you don't end up paying taxes on the amount. Operations An IRA distribution form will have a "Method of Payment" section where you complete the charity's name and address. Disclaimer If legal, tax, or other professional advice is required, the services of a competent professional should be sought. This post should not be considered investment advice. This information is subject to change and/or be edited. Past performance is not a guarantee of future results.
  2. A Required Minimum Distribution (RMD) is the minimum amount you must withdraw from your retirement account each year. Minimum distribution rules in this post apply to: Traditional IRAs SEP IRAs SIMPLE IRAs 401(k) Plans 403(b) Plans 457(b) Plans Profit Sharing Plans Other defined contribution plans When to start an RMD An account owner needs to start his/her withdrawals when they reach the age of 70 ½. The first RMD must occur by April 1st of the year after you turn 70 ½ . However, if you still participate in a 401(k), profit-sharing, 403(b), or other defined contribution plan, you can delay taking the RMDs until you retire (unless you own 5% or more of the sponsoring business). When to take an RMD (after the first time) Normally, you must withdraw your RMD by December 31. Tax Tip Don’t wait until April 1st for the first RMD. This will cause you to take both the first and second RMD in the same year. Thus, increasing your tax burden. Instead, your first RMD can be taken out by December 31st of the year you turn 70 ½. Calculating the RMD Take the account balance at the end of the previous year and divide it by the distribution period from the IRS’s “Uniform Lifetime Table”. Previous Year-End Balance/Distribution Period=RMD Penalties for failing to take RMD A 50% excise tax is assessed on untaken RMD amounts. Disclaimer If legal, tax, or other professional advice is required, the services of a competent professional should be sought. This post should not be considered investment advice. This information is subject to change and/or be edited. Past performance is not a guarantee of future results.
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