Giving from your IRA
For those over the age of 72, the IRS has offered a way to donate to one’s favorite non-profits so that the amount will be exempted from income taxes and more funds will be available to the organization.
Holders of IRA’s and other tax qualified savings plans are required to receive a minimum distribution (the “RMD”) each year after they reach the age of 72. Those withdrawals are taxed as income. If those withdrawn funds are then donated to a charity, that donation may or may not be deductible from taxable income as a charitable donation because of various restrictions. However, there is a way to insure that the amount of a charitable donation is entirely exempted from your income tax and the full amount can be donated for the cause of your choice.
These funds will be exempted from income tax when, instead of receiving the RMD yourself, you direct that all or part of your required minimum distribution be sent directly to the charity of your choice. You can arrange for your broker or pension advisor to send a check directly to your beneficiary charity. Then, it will not be subject to deductions for taxes and will not be included on your 1099.
Your required minimum distribution can certainly be used to fulfill your annual fair share contribution to NYSEC or to make a special donation to the Ethical Society or the American Ethical Union. If you have any questions about how this works, please call your tax or investment advisor for more information.