A Year-End Tax Planning Idea to Suggest to Your Clients

As insurance professionals, many of our clients want to talk to us about taxes, and our conversations naturally gravitate toward reducing tax liabilities.

For many, December offers one of the last chances to manage income taxes for the year. Regarding our higher net worth clients or prospects, how about making a Qualified Charitable Distribution? Many people have untaxed qualified money invested in an Individual Retirement Account (IRA). A required minimum distribution (RMD) is mandatory after age 70 ½. This law creates a taxable event even though the money distributed is often neither needed nor wanted as income.

One possible solution is for the senior taxpayer to make a Qualified Charitable Distribution (QCD) from his qualified money account. This type of distribution must be paid directly to the charity from the account. The IRA owner can exclude up to $100,000 of the QCD for the year, and the QCD can be used to satisfy the required minimum distribution for the year, thus offsetting the tax on additional unwanted income.

The ability to make QCDs will expire in 2014, but Congress may decide to extend these distributions either by the end of this year, or retroactively in 2014.

We are neither accountants nor professional tax planners, but ideas like the QCD are simple and straightforward. Our clients appreciate new concepts and suggestions, and will be loyal to us if they perceive we have their best interest at heart.


comments powered by Disqus