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These seniors can still get a tax break for charitable contributions even if they don’t itemize

People reaching 70½ must begin taking withdrawals from their individual retirement accounts (IRAs) and workplace retirement plans under the rule for “required minimum distributions.” (iStock)

Some seniors are finding that their taxes are going up despite a more generous standard deduction, because of a provision that requires them to take money from their retirement accounts even if they don’t need the cash.

People reaching 70½ must begin taking withdrawals from their individual retirement accounts (IRAs) and workplace retirement plans under the rule for “required minimum distributions” or RMDs. Of course the distribution means paying taxes on the withdrawn amount.

The Tax Cut and Jobs Act increased the standard deduction. Many individuals who itemized in the past may find that taking the now-higher standard deduction is a better tax move.

There’s a boost in the standard deduction if you’re 65 or older. Under the new changes, if you are single, the standard deduction is $12,000. But it jumps to $13,600 if you are older than 65. For married couples filing jointly, the standard deduction is $24,000. But it increases to $26,600 if both spouses filing jointly are 65 or older.

When you take the standard deduction, you can’t itemize and claim certain deductions such as charitable contributions. But there is a way for some seniors to still get credit for their giving, thereby reducing their taxable income even if they don’t itemize.

If you turned 70½ last year, you can’t afford to miss this April 1 tax deadline

“Our financial adviser gave us another option for RMDs,” wrote Robert Dwyer from Pocasset, Mass. “My wife has an IRA from which an RMD was required for 2018. Our adviser told us of a provision in the regulations that would allow us to distribute some of the RMD from her IRA directly to a charity, and exclude those funds from 2018 income. It’s called a ‘qualified charitable distribution.’ My wife directed a QCD to our parish in lieu of smaller weekly donations we would make with after-tax funds."

It’s true that your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA.

Tom Uttormark of Roman Forest, Tex., wrote, “One often-overlooked tax break is the QCD. If the taxpayer directly transfers funds from the IRA to a qualified charity, those dollars count toward the RMD for the year, but are not counted as income. The net effect: The taxpayer is getting a tax deduction for charitable giving without itemizing deductions. If you normally make charitable contributions, this is a great way to help your charity and yourself.”

Washington Post financial columnist Allan Sloan recently addressed QCDs.

Read: Is the stock market up or down? Is the bull run beginning or ending? It depends.

Sloan also suggests making charitable contributions via “qualified charitable distributions” from retirement accounts rather than by writing personal checks to a charity. By the way, the charity has to be a qualified 501(c) (3) organization eligible to receive tax-deductible contributions.

“Lots of blue state types — including my wife and me — are now taking the standard deduction on their federal returns because of the $10,000 cap on state and local taxes,” Sloan wrote. “By having retirement income diverted to charities, someone in my position can in effect deduct charitable contributions and still take the standard deduction.”

If you choose this path, Sloan has some practical advice on how to report the charitable gift on your tax return.

“The 1099-R forms that disclose retirement income to us and the Internal Revenue Service don’t include any mention of QCDs,” he wrote. “To make sure you benefit from your QCDs, subtract them from the number on Line 4a in your return and put the income-less-QCDs number on Line 4b, which shows federally taxable income. If you use a tax preparer, make sure to tell him or her about your QCDs. In addition, the IRS tells me that you (or your preparer) should write QCD on Line 4b so that the IRS knows why that number is smaller than the 4a number.”

Be aware that a QCD is available only to IRA owners 70½ or older. And the maximum annual exclusion for QCDs is $100,000. If you file a joint return, your spouse also can have a QCD and exclude up to $100,000. For more details read IRS 590-B “Distributions from Individual Retirement Arrangements (IRAs).” Skip to page 13 for the discussion of qualified charitable distributions.

If you can afford to be charitable, this is certainly a way to be kind and get a good tax break.

Read more:

How to cope with the Trumpublican tax bill

Red flags that your tax preparer is a fraud

Retirement Rants and Raves

I’m interested in your experiences or concerns about retirement or aging. What do you like about retirement? What came as a surprise?

If you haven’t retired yet, what concerns you financially?

You can rant or rave. This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to Please include your name, city and state. In the subject line, put “Retirement Rants and Raves.”

I hear quite often from retirees who are unhappy about what’s called a “windfall elimination provision,” or WEP, because it results in their Social Security benefits being reduced. This provision can affect how Social Security calculates your retirement or disability benefits.

Fred Zackel of Ohio wrote, “I worked for years driving taxicab. And then I went back to school and got a PhD and then I got a job for 22 plus years as a teacher with the university taking money from my pay and placing it in a pension fund. When I retired, Social Security says I only get half of my earned Social Security money because I have a school pension.”

But here’s the thing, as the Social Security Administration (SSA) explains, “if you work for an employer who doesn’t withhold Social Security taxes from your salary, such as a government agency or an employer in another country, any retirement or disability pension you get from that work can reduce your Social Security benefits.”

The agency says the provision can apply under these circumstances:

— You reached 62 after 1985

— You were disabled after 1985

— You first became eligible for a monthly pension on the basis of work where you didn’t pay Social Security taxes after 1985. This rule applies even if you’re still working.

Q&A for federal workers: The ‘windfall' benefit reduction

Why the cut?

“Before 1983, people whose primary job wasn’t covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers,” according to a guide by SSA. “They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job for which they didn’t pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that advantage.”

I know the explanation may still not make you happy, but here’s additional reading to further explain the reason behind what you might find is madness.

Read more:

Understanding Social Security For The Public Sector: The Windfall Elimination Provision

Color of Money Live: Talking with Social Security expert Andy Landis

Can retirement ruin your marriage?

Robo-calls have these retirees afraid to answer their phones

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