QBs, RMDs And The Bunching Play

by Phil Hanson, President and CEO, Truman Heartland Community Foundation
 

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​     It’s officially fall, and we are all hoping for some great fall football weather that will complement our incredible Chiefs team this season. Not that we have fair weather fans, but after the monsoon weather on home opener weekend, they deserve a break. And Patrick Mahomes is certainly a fun QB to watch both on and off the field.
     Do you know what our QB Patrick Mahomes and RMDs have in common? Fall is a critical time for optimum performance. RMDs are Required Minimum Distributions that those who are 70 ½ or older must take as a distribution from an IRA. Now is the time to plan for your RMDs so the IRS referee does not throw a flag and penalize you, not with a 15-yard personal foul but a 50 percent penalty of the amount not taken as required. 
     As you design your plans for this year’s RMDs, keep in mind that a contribution directly from your IRA to a charity will satisfy your RMD. This is known as a Qualified Charitable Distribution (QCD) and with the higher standard deduction, a smart tax strategy since QCDs are not reported as income on your tax return.
     Up to $100,000 in QCDs can be utilized each year. And if you are one of the more than 20 million people who discovered they could not itemize their deductions for 2018 because of the higher standard deduction, a QCD from your IRA could be a useful strategy.
     For 2019, the standard deduction for a married couple filing jointly is $24,400, up $400 from 2018.  With the higher standard deduction, many charitable people found themselves in an unfamiliar situation last year and were not able to itemize for the first time in many years. If this sounds familiar to you, talk to your financial advisor about making a QCD from your IRA.
     Another good tax play is charitable bunching with a donor advised fund. A donor advised fund, like a charitable giving savings account, is an ideal way to strategically plan charitable gifts and when you make contributions to your donor advised fund you immediately receive a charitable contribution.
     With a charitable bunching strategy, you put two- or three-years’ worth of charitable contributions into your donor advised fund. This allows you to exceed the new standard deduction and provides additional tax savings. Then in the following years you take the standard deduction and continue to support your favorite charities by making grants from your donor advised fund. However, please note that donor advised funds are not allowed to accept QCDs, so talk with your financial advisor about these charitable giving strategies.
     So, as you are cheering for the Chiefs this fall, take time to design some plays for your charitable giving and effective tax planning before the clock runs out. We all need well-designed plays for success.
 
     Phil Hanson is the President and CEO of Truman Heartland Community Foundation. Truman Heartland Community Foundation (THCF) is a 501(c)(3) public charity committed to improving the communities in and around Eastern Jackson County through cooperation with community members and donors. THCF serves the region with assets of more than $49 million and annual grants surpassing $4.4 million. For more information on charitable giving, visit www.thcf.org of call Truman Heartland at 816.836.8189.