Gift Ideas from Retirement Funds
Charitable contributions using retirement assets also provide a tax planning opportunity during an individual's lifetime, assuming the donor does not need to rely on said retirement assets in the future.
Qualified Charitable Distributions (QCD) are available for individuals over 70½ years old to donate up to $100,000 in IRA assets directly from the financial institution to the charity annually, without taking the distribution into taxable income. The CARES Act did not change the rules around QCDs so these remain an available strategy for those over age 70½.
For 2021, the ability to deduct up to 100% of an individual's AGI for cash charitable contributions effectively provides similar benefits to a QCD for individuals older than 59½. The individual can take a cash distribution from the IRA, individually contribute the cash to charity, and the contribution will completely offset tax attributable to the distribution with charitable deduction in an amount up to 100 percent of their AGI for the tax year.
As always, we recommend you consult with your financial planner/tax advisor before initiating any contributions relating to retirement assets or in relation to tax planning for 2021. Your advisors will need to ensure that documentation is properly executed with your financial institution, the charitable contributions are in agreement with your overall financial planning and the contributions are reflected correctly on your tax return next year. Any references to tax deductions are applicable only to federal income tax and your tax advisor should be consulted as to applicability to state income taxes.