Featured Client Spotlights

CLIENT SPOTLIGHT: Factory Five Racing

Factory Five Racing was founded in 1995. Over the years they have grown from a start-up business in a small garage to become the world's largest manufacturer of "build-it-yourself" component car kits. They employ a full-time crew of about 40 people, and are located in Wareham, Massachusetts (about an hour south of Boston). They make their products right here in the USA, in the heart of New England where American manufacturing was born.
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        Charitable & Nonprofit Organizations

        Qualified Charitable Distributions

        With Giving Tuesday around the corner, nonprofit organizations should continue to communicate to its donor base the diverse ways to make a charitable gift.

        An IRA owner who is over the age of 70 ½ may have money transferred directly from the IRA to a charity, up to a total of $100,000, known as a qualified charitable distribution (“QCD”). The IRA withdrawal will not be subject to income tax, nor will it be deductible. Why is this better than including the withdrawal in taxable income and then taking a deduction for donating it to charity?

        • The QCD is particularly valuable for a donor who does not itemize income tax deductions. With no ability to deduct charitable contributions, this donor typically receives no tax benefit from a gift to charity. Any IRA withdrawal is subject to income tax even if it is donated to charity. The QCD keeps the IRA money off of the tax return, eliminating the tax on the withdrawal.
        • Some amounts (for example, medical expenses and tax preparation expenses) are only deductible to the extent they exceed a percentage of adjusted gross income. A taxable IRA withdrawal increases adjusted gross income, reducing the value of the deductions that are based on adjusted gross income. This may make other deductions more valuable.
        • Some donors find that their charitable contributions are limited because they exceed a given percentage of their adjusted gross income. Because QCD gift is neither taxable nor deductible, it is not subject to the caps on the deductibility of charitable gifts. The QCD lets the donor exceed the limits that apply to the donor’s other charitable gifts.
        • An increase in an individual’s base amount may make more of the individual’s Social Security benefit subject to income tax. By not being included in AGI, the charitable rollover will not be included in the base amount, which would otherwise result in an increase for income subject to income tax.
        • Higher levels of income increases Medicare premiums in future tax years. If donations to charity are made directly through the QCD provision, the exclusion of this amount in taxable income could keep the Medicare premiums from being increased in future years.