Creative Charitable Giving can save you on taxes!

Giving to your favorite charity can take many forms. It can be through ongoing monthly or annual generosity, or a longer-term philanthropic plan via a will. There are several ways of making an impact on causes that are important to you. One particularly advantageous tax method of donating is through Required Minimum Distributions from an IRA account.

Required Minimum Distributions (RMD’s) are the minimum amounts that individuals must withdraw from their tax deferred retirement accounts, such as IRAs starting at age 73. These distributions are subject to ordinary income tax which can increase your taxable income and potentially push you into a higher tax bracket.

A Qualified Charitable Distribution (QCD) allows individuals aged 70.5 or older to donate from their IRAs to charitable organizations and avoid ordinary income tax. This donation counts toward satisfying your RMD for the year and is not included in your taxable income, helping to lower your overall tax burden. Ask your financial institution to make this donation directly to a qualifying 501(c)(3) charity and it will not be included in your Adjusted Gross Income (AGI). This must be done by December 31 of the tax year. The tax savings applies to any qualified distributions from a tax deferred IRA account, such as traditional IRA, inherited IRA, SIMPLE IRA, and SEP IRA. Individuals can give up to $111,000 per year and a married couple up to $222,000!

If philanthropy is already part of your financial plan, giving your RMD to a QCD can be a great way to optimize the tax benefits of giving. Your financial advisor or tax professional can help you make sure your giving strategy aligns with your retirement goals as well as any changes to tax rules.

By Becky Hall

Friends of Miller Bay is a 501(c)(3) charity EIN #55-0860910