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Add Value with the QCD conversation.

Sam Payne RICP®, CLTC VP, Business Consultant

Referrals, the holy grail of any enterprise, are a byproduct of providing exceptional service and value to your existing clients. So much so that they want to share you with their friends and acquaintances, and so you become referable.

Informing and educating your clients about Qualified Charitable Distributions (QCD) and the benefits of using them while filling out their tax forms, I believe is one of those opportunities to add value. The more value you add, you more likely you will become more referable.

What is a QCD? QCD have been around in some form since the Pension Protection Act in 2006. Their value changed as a result of the Tax Cuts and Jobs Act of 2015. And under current tax law, they can provide an additional benefit for tax years 2018 through 2025. Before 2018, the QCD strategic importance lay primarily in the fact that it could help older taxpayers meet their philanthropic goals while also satisfying individual retirement account (IRA) required minimum distributions (RMDs).

Since the passage of the Tax Cuts and Jobs Act of 2017, and the increase in the standard deduction, many individuals find themselves in a position where their total itemized deductions do not exceed the standard deduction, so deducting charitable contributions will not have the benefit it may have previously.

Here’s an example: For the 2018 tax year, a couple plan to file jointly. They are both age 75 and anticipate adjusted gross income (AGI) of $125,000, including $60,000 in RMDs.

  • $125,000 total income (including 60,000 RMD)
  • Standard deduction $26,600
  • Charitable gift $5,000
  • Taxable income $98,400 ($125,000 minus standard deduction)

If the QCD were utilized, the taxable income would be $93,400 saving approximately $1,100 in taxes.

Let’s try and make this a little easier. What is a QCD in a nutshell? It is a section of the tax code designed to help older Americans fulfill their charitable wishes directly from an IRA.

What does it do? It allows individuals who are required to receive required minimum distributions from IRA’s to have their, or some portion of their RMD, sent directly to the charity so that the RMD does not show up as income on the individual’s tax return.

What does that mean? You can still make your charitable donations, and by using the QCD, you may be able to save some taxes along the way.

Reach out to your Business Consultant for more information on QCD, the rules, and limitations. You can also begin talking to your clients currently receiving RMDs. Start the conversation by asking if they are giving to a charity annually and if they are utilizing the QCD?

This is one of many ways to add value to your clients and become more referable. We have a great brochure, “A Guide On How To Gain Clients Through Effective Referral Process,” that shares other ideas to attract more referrals.

Reach out to your Marketing Consultant with any questions and on how you can get started at (858) 303-8755.