Once an IRA investor reaches 70.5 years of age they are required to begin withdrawing money from their account. The amount required to be withdrawn is called a Required Minimum Distribution (RMD) and is based on the IRS Uniform Lifetime Table. The RMD is taxable income and causes not only an increase in income taxes but may also increase Part B and D Medicare premiums. The extra income can result in more of Social Security income to be taxed.
In December 2015, Congress passed the Qualified Charitable Distribution provision and made donating pre-tax money from the RMD a permanent provision of the tax code. Now, an IRA holder over the age of 70.5 can donate up to $100,000 of their RMD to a qualified charity. And with the 2018 new tax law making itemizing a rare case, it makes even more sense to make your charitable gift from your RMD. If you don’t itemize you cannot claim charitable donations on your tax forms. You immediately save on income taxes due on the RMD and reduce your overall income for the year.
A few simple requirements; the money is limited to the RMD and capped at $100,000. The money must come direct from the IRA custodian to the charity. It cannot go to the owner first. Plus, the money contributed reduces income but cannot then be claimed as a charitable donation (if you itemize)—that would result in a double deduction.
For more information on how to donate from your IRA RMD, contact your financial advisor or the custodian of your IRA.