Modern FINANCE
A Welcome Gift from the Tax Gods
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By Philip RC Dudley
eflecting on the proper message for my first column in Country ZEST, I’m going to address a rather mundane but most important subject (it is tax season after all!)—the Qualified Charitable Distribution (QCD). I’ve been tasked with writing about all things financial in these pages and hope you’ll learn something new. After all, as they say, knowledge is power, particularly when it comes to personal finances. The pandemic obviously has taken a serious toll on many Americans, so why not consider making charitable contributions this year from your retirement account to help satisfy those Required Minimum Distributions (RMD) as well as supporting countless worthy causes. The QCD has been around for years but took on a heightened level of importance in 2018 for taxpayers over 70 wishing to make charitable contributions while lowering their Adjusted Gross Income (AGI). It clearly was a win-win situation.
Philip Dudley
And why is that such a big deal now? The answer is simple. Former President Donald Trump’s 2017 tax law changed the way many Americans claimed deductions. This “gift” from the Tax Gods was eliminated in 2020 due to the pandemic, but has been reinstated this year.
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With taxpayers now being faced with a higher bar to itemize deductions, the QCD makes a lot of sense. It works something like this. As an example, let’s say a fictional fellow named Bushrod Rust (a nod to the man who, in 1846, built my home) is now 72 and required to distribute $50,000 from his IRA. Bushrod could make direct charitable contributions in the amount of $10,000 from his IRA, reducing his taxable income by 20 percent and, at the same time, satisfy this current RMD because he can claim the full $50,000 distribution on his federal tax return. And so, I urge you to consider this tax-savvy move in 2021 as we start to emerge from our homes and our great country takes early steps to re-open. Currently, there are many in need and I know this area has a well-deserved reputation for helping those less fortunate. And if Mr. Bushrod was alive today, I’d definitely be advising him to take a very strong look at the QCD option. Upperville native Philip RC Dudley is managing partner of Dudley Capital Management, 115 The Plains Road, Suite 250 and PO Box 494, Middleburg, VA 20118. For more information, he can be reached at philip@dudleycapital.com and (O) 540-687-4600 or (C) 202-441-7707.
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Go Green Middleburg | Spring 2021
