How Seniors Can Use Required Minimum Distribution (RMDs) In IRA For Charity & Lower Taxes

For seniors, retirement can be a challenge. At the same time, it’s an exciting time of life with many opportunities for doing good and being philanthropic. One way to use your IRA funds is by taking required minimum distribution from your IRA and donating them to charity or using them to fund local programs that support the needs of older adults in our community. In this blog post, we’ll explore how you can do both!

A Required minimum distribution is A calculation that determines how much money must be withdrawn from one’s IRAs during their lifetime based on age and account balance; also known as “required minimum withdrawal.” For most people, this will happen once they turn 70 1/2 years old because at that point they are required to take money out of their IRA. Required minimum distributions can be taken from the account as a lump sum or in periodic installments, and it is at the discretion of the individual how this withdrawal takes place. In most cases, this withdrawal is seen as income.

How These distributions Can Be Used for Charity?

These distributions can be donated to your favorite charity and used as a tax deduction. This is an easy way of ensuring that you have contributed to charities in the past year, while also lowering your overall income! When it comes time to file taxes, any distributions that were made in the past year will be listed under “Other Income” and can then qualify for a generous tax deduction.

How Will I Benefit If I Donate to Charity?

You will have the satisfaction of knowing that you are using your RMD to help a charity, and you might also qualify for a tax deduction. Your RMD is not an itemized deduction (like charitable contributions), but it may be deductible if certain conditions apply:

You gave away at least 25% of your distribution in cash (check or money order) to a qualified charity; and if
RMDs from the IRA was not used in that same year for something other than paying tax, medical expenses exceeding certain limits, buying your first home (USD 250k), education expenses (qualified tuition/fees), health insurance premiums after retirement.

What Charities Can I Donate Too?

You can donate to any charity, but some charities offer special benefits for donors.

Some of these include:

Estate Tax benefits (donating appreciated property)
Housing subsidy programs or discounts on housing expenses such as utilities and maintenance costs;
Private school tuition reductions/eligibility for scholarships in the future, tax credits for tuition scholarships in the future.
Tax credit or deduction for federal estate taxes and capital gains taxes by transferring appreciated property to a private foundation (charitable lead trust).

Please consult your attorney or financial advisor before you donate any of these assets. Each has different rules and regulations.

How will it lower my income?

Seniors can use their distribution to invest in charitable giving, which will lower their taxable income. For example, a senior with Reverse Frailty $12,000 of required minimum distributions who donates the money to charity has an adjusted gross income of $0 and owes no taxes on that distribution. They could even donate all their RMDs for the year and have a taxable income of $0.

Where Can I Get More Information?

If you looking for more information on how to use your for charity, contact the custodian of your IRA to find out how to donate your distribution.

It is commendable to donate your distributions to charity. If you would like some help in deciding where and how we are here for you. We can answer any questions about using your RMDs as a charitable donation or set up the process with your IRA custodian so that it’s easy and seamless. You will be left feeling satisfied knowing that you have helped those less fortunate than yourself while also getting tax benefits along the way! Contact us at https://bfscpafirm.com and let us know if there is anything else we can do to help make this experience easier on you.