Fund a VA NAP With A Qualified Charitable Distribution From an IRA?

Home Fairmark Forum Retirement Savings and Benefits Fund a VA NAP With A Qualified Charitable Distribution From an IRA?

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  • #7750
    ReachELS
    Participant

    The state of Virginia allows a 65% VA Tax Credit for donations to Neighborhood Assistance Programs (NAP).

    My long-range planning suggests that I will struggle to keep my MAGI below the threshold for Medicare IRMAA charges once my RMDs kick in. One solution for reducing MAGI is to make a Qualified Charitable Distribution directly from one’s IRA to a charity. This contribution, which will satisfy a portion of your RMD, reduces the reported distribution on your 1099-R by the contribution amount thereby lowering your MAGI.

    So, I was wondering…

    Assume I was to make a charitable contribution – directly from my IRA – to one of the qualified NAP programs. I cannot deduct the contribution as a charitable deduction as the money has never been taxed in the 1st place. But…can I get the 65% VA Tax Credit?

    #7767
    Alan S.
    Participant

    As you can see from the following article, you cannot get the full benefits of the QCD and the NAP credit.

    Q&A: Can I Still Use a QCD to Get State Tax Credits?

    You do have a two choices however and will have to determine which combination provides the most benefit.

    #7768
    ReachELS
    Participant

    Thank you Alan.

    Not sure how I quoted my Google search to not find that link.

    This is a classic illustration of “The Law of Unintended Consequences”. The high-tax state legislators create a silly scheme to circumvent the SALT limitation that they had to know would not fly. The IRS (naturally) issues new guidelines to thwart their efforts but, in doing so, impacts not only the frivolous SALT scheme but legitimate charitable programs as well.

    These programs (NAP, Conservation Easements, etc) were caught in the crossfire…and will suffer as a result.

    A pox on all their houses.

    #7771
    Alan S.
    Participant

    Yes, and this IRS ruling also scaled back tax benefits in some states with state tax credits that did not enact any state legislation regarding the SALT limits.

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