Donating Required Minimum Distributions from IRAs to Charity: A Legacy of Giving
Are you considering how to make the most of your IRA and retirement savings?
If so, have you considered making a donation from those funds? Donating required minimum distributions (RMDs) from IRAs to charity is one smart way not only to support the causes that matter most to you but also leave behind a legacy of giving.
Not only will it benefit charities, but donating RMDs can provide some peace of mind knowing future generations won’t be left with hefty taxable organizations.
Let’s take a closer look.
What Are Required Minimum Distributions (RMDs)?
RMDs are mandatory withdrawals from your traditional IRA or other qualified retirement accounts once you reach a certain age, typically starting at 72 years old.
The goal is to ensure that individuals pay taxes on the money they have saved throughout their working career. It’s important to note that failing to take the RMD can result in steep penalties.
Is there a way to lower your taxable liability? Yes…donate to a charity!
How Can Donating To Charity Help?
Donating your RMDs to charity is not only a savvy financial move but also a powerful way to create a legacy of giving.
By channeling your financial resources into causes you believe in, you leave behind a testament to your values, passions, and the impact you hope to make on the world.
When an RMD is taken from an IRA, it’s reported as taxable income for the retiree.
However, if that amount is donated directly to a qualified charity, it can be excluded from the retiree's taxable income which means that the retiree can potentially lower their tax bracket and keep more of your hard-earned money.
Which let’s face it, with the cost of inflation right now, every little penny helps!
It’s important to note that this type of charitable donation can only be made from traditional IRAs – not from Roth IRAs.
Also, donating RMDs to charity can be a way for retirees to give back to causes and organizations that have been important to them throughout their lives which can have a meaningful impact on a charity's finances and mission.
So, how does one go about donating their RMDs to charity?
The process is relatively simple, but there are a few important things to keep in mind.
The charitable donation must be made directly from the IRA custodian to the qualified charity.
The donation must be made before December 31st of the tax year in which the RMD is required.
Keep proper documentation of the donation for tax purposes.
Are there any limitations or restrictions to donating? As with anything, yes.
The maximum amount that can be donated annually is $100,000 per taxpayer and the donation cannot be made to a donor-advised fund, private foundation, or supporting organization.
Donating required minimum distributions from IRAs to charity is a great way for retirees to support causes they care about while also receiving tax benefits.
It’s a meaningful way to leave a legacy of giving that will continue to impact the community long after they have passed away.
By following the proper procedures and working with a financial advisor, retirees can ensure that their donations make the greatest impact possible.
Have some questions? Contact our office today!
DISCLAIMER: The content contained herein is for general informational purposes only. These materials do not constitute legal or other professional advice. We do not accept any responsibility for any loss that may arise from reliance on this information. No reader should act or refrain from acting based on information contained in this article without seeking advice of counsel.