Charity Donatrion

Qualified Charitable Distributions: Save Taxes & Use Your IRA for Charity!

by | Mar 19, 2019 | Estate & Legacy Planning, Financial Planning, Insights, Philanthropic Planning, Tax Planning | 0 comments

If you own a traditional IRA or other pre-tax retirement account, you’re likely aware that Required Minimum Distributions (RMDs) start once you reach age 72…whether you need them or not. These withdrawals are taxed as ordinary income and, if you don’t need this income, it may feel like an unnecessary tax bill.

But did you know that your RMD can be taken in the form of a Qualified Charitable Distribution, where a qualified charity receives all or part of your RMD? This satisfies your obligation and offers a potential tax advantage. Giving these funds to charity impacts a cause you care about and reduces your tax bill.

How to use your unneeded Required Minimum Distribution for charity!

Here are a few general guidelines to know if qualified charitable distributions sound like they might be a fit for you.

  1. You can only make a qualified charitable contribution after you reach age 70.5.
  2. There is a cap of $100,000 on qualified charitable distributions per individual per year.
  3. The charity must be a qualified 501(c)3 organization.
  4. You must make your distribution check payable directly to the charity in question, not to a director or another individual in the organization.

Want to give part of your RMD as a qualified charitable distribution and take the rest for yourself? You can! These would be separate transactions, but if they add up to the necessary RMD, you’ll still meet the requirement.

If you’re frustrated with high taxes and unnecessary IRA withdrawals, and have a cause you care about supporting, a Qualified Charitable Distribution might be a good option for you to consider. Your advising team to see how this works into your financial plan!

Zach Hamilton

Partner, Financial Advisor

About the Author

Zach graduated from Gonzaga University with degrees in Marketing and Finance. While growing up, Zach heard stories from his grandfather about his work as an insurance agent, and other stories from his dad who was an investment manager. They both spoke financial “languages” but had completely different dialects. Recognizing the breadth of the financial vocabulary ultimately led to Zach’s passion for financial planning. He credits his family for this enthusiasm. Zach sees his time with clients as an opportunity to translate all of the different – and often confusing – information they’ve heard and provide clear guidance for each unique situation.

Zach enjoys working with people – his clients – who also appreciate that their financial decisions have an impact not just on themselves, but also on their families, charities and their own life legacy. Many of Zach’s clients have a strong desire to “make a difference”, and they rely on his financial expertise to magnify their philanthropic goals.

The “Alterra” name was coined by joining the Latin roots “alter”, the origin of the word “altruism” with “terra” meaning earth or land. This name reflects the company philosophy of “clients before profits” and providing firmly grounded advice.

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