You can help charities at a time when the need has never been greater. If you've reached the age where you need to take required minimum distributions (RMDs) from your traditional IRAs, you can reduce taxes by donating that money to charity.
Gene Yarussi has been supporting local charities, like the Community Foundation, for years. He doesn’t remember how long ago he started making IRA distributions but, he likes to help local nonprofits this way because he says, “I am lucky to have the means.”
Would you like to make a larger charitable gift than you could if you donated cash? Would you like to reduce your taxes? If so, you have to be sure to follow the rules carefully.
1. How QCDs Work: A charitable IRA rollover or qualified charitable distribution (QCD) allows individuals who are taking their RMD (usually 70½ years old or older*) to donate any amount (no more than $100,000 total) to charities directly from a taxable IRA instead of taking their RMD. As a result, donors may avoid being pushed into higher income tax brackets and prevent phaseouts of other tax deductions, (and other limitations, please ask your accountant).
The value of charitable gifts that can be deducted from a tax return usually ranges from 20 - 60 % of a donor’s adjusted gross income. This AGI-based limit does not apply to QCDs, allowing donors to make larger gifts! For these reasons, a QCD can potentially enable a donor to give a bigger charitable gift than they could if they just donated cash or other assets.
2. Here's how you do it: It takes just three distribution steps to give retirement assets: (1) Find the form on your IRA custodians website, (2) Fill out the form naming Community Foundation as recipient using our tax info (below), (3) Mail the form in.
Community Foundation tax ID or EIN#16-1587553 and NY State Charities registration #06-80-93.
Gene has a team of financial advisors who looked into the long-range expenses of how much he needs to take care of himself, his wife, kids and help the community he lives in. “I am fortunate that I have this benefit and I have chosen to do good with it. I encourage others to do as well, if you are able.”
Note: IRS does NOT allow IRA Charitable distributions to donor advised funds; all other fund types (operational, designated, and field of interest) are eligible. Please call us or your professional advisor.
* Plan participants and IRA owners who reach the age of 70 ½ in 2019, the prior rule applies and the first RMD must start by April 1, 2020. For plan participants and IRA owners who reach age 70 ½ in 2020, the first RMD must start by April 1 of the year after the plan participant or IRA owner reaches 72.