Qualified Charitable Distributions

Donating to charity is its own reward, but reaping the tax benefits is a nice added bonus. With the passing of the Tax Cuts and Jobs Act, nonprofits nationwide are keeping a close eye on how the new law may affect charitable giving. The new tax law significantly increases the standard deduction and changed many itemized deductions claimed on a Schedule A. The tax reform has led many to consider how much they give and the ways in which they do so.

One area where we are already seeing an upward trend is charitable giving through an Individual Retirement Account (IRA). Taxpayers who are over age 70 1/2 and are taking IRA distributions may direct up to $100,000 of these distributions to a qualified charitable organization, such as United Way of Greater Richmond & Petersburg. This direct-to-charity transfer reduces the income reportable from the IRA, in effect creating a deduction for the charitable gift without the need to itemize deductions.

Donors might consider this option if they do not expect their itemized deductions to exceed the new standard deduction amount ($24,000 if married and filing jointly, $18,000 head of household and $12,000 single). This transfer counts towards fulfilling your annual required minimum IRA distribution.

Other options donors may wish to discuss with a financial advisor include “bunching” (giving a greater amount every other year rather than giving every year), utilizing donor-advised funds to receive an immediate tax break for the full donation and recommending grants over time, and changes to estate plans.

If you would like to discuss these changes and how they may impact your gift, please contact:

Samantha McCabe 
Manager of Leadership Giving
United Way of Greater Richmond & Petersburg