Did you know that if you are 70 ½ years or older you can donate up to $100,000 from your IRA directly to a qualified charity such as Thin Air Community Radio without having to pay income taxes?
Call KYRS for more information: 747-3012.
WHY CONSIDER THIS GIFT?
If you are age 70½ or older, IRS rules require you to take required minimum distributions (RMDs) each year from your tax-deferred retirement accounts. This additional taxable income may push you into a higher tax bracket and may also reduce your eligibility for certain tax credits and deductions. To eliminate or reduce the impact of RMD income, charitably inclined investors may want to consider making a qualified charitable distribution (QCD).
A QCD is a direct transfer of funds from an IRA custodian, payable to a qualified charity, as described in the QCD provision in the Internal Revenue Code. Amounts distributed as a QCD can be counted toward satisfying your RMD for the year, up to $100,000, and can also be excluded from your taxable income. This is not the case with a regular withdrawal from an IRA, even if you use the money to make a charitable contribution later on. In this scenario, the funds would be counted as taxable income even if you later offset that income with the charitable contribution deduction.
Why is this distinction important? If you take the RMD as income, instead of as a QCD, your RMD will count as taxable income. Having higher taxable income can directly impact your eligibility for certain deductions and credits. For example, your taxable income helps determine the amount of your Social Security benefits that are subject to taxes. Keeping your taxable income level lower may also help reduce your potential exposure to the Medicare surtax.
•Your gift will be put to use today, allowing you to see the difference your donation is making.
•You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.
•If you have not yet taken your required minimum distribution for the year, your IRA charitable rollover gift can satisfy all or part of that requirement.
The biggest mistake people make is that QCDs should to be taken out first from an IRA before withdrawing the remainder of their Required Minimum Distribution (RMD). Let’s say my RMD requirement for my IRA for this year is $10,000. I want to give the charity $4000 dollars. I should have the QCD processed before I withdraw the remaining $6000 to me personally. Most people withdraw their RMD money early in the year or set up monthly payments so it’s important to have them consider any QCDs to charities before taking RMSs for the next year.
Since a QRD is tax free, the charity gets more money from the donor than if the donor withdraws money, pay taxes on it, and then donates.
FREQUENTLY ASKED QUESTIONS
Q. I’ve already named Thin Air Community Radio as the beneficiary of my IRA. What are the benefits if I make a gift now instead of after my lifetime?
A. By making a gift this year of up to $100,000 from your IRA, you can see your philanthropic dollars at work. You are jump-starting the legacy you would like to leave and giving yourself the joy of watching your philanthropy take shape. Moreover, you can fulfill any outstanding pledge you may have made by transferring that amount from your IRA as long as it is $100,000 or less for the year.
Q. I’m turning age 70½ in a few months. Can I make this gift now?
A. No. The legislation requires you to reach age 70½ by the date you make the gift.
Q. I have several retirement accounts—some are pensions and some are IRAs. Does it matter which retirement account I use?
A. Yes. Direct rollovers to a qualified charity can be made only from an IRA. Under certain circumstances, however, you may be able to roll assets from a pension, profit sharing, 401(k) or 403(b) plan into an IRA and then make the transfer from the IRA directly to Thin Air Community Radio. To determine if a rollover to an IRA is available for your plan, speak with your plan administrator.
Q. Can my gift be used as my required minimum distribution under the law?
A. Yes, absolutely. If you have not yet taken your required minimum distribution, the IRA charitable rollover gift can satisfy all or part of that requirement. Contact your IRA custodian to complete the gift.
Q. Do I need to give my entire IRA to be eligible for the tax benefits?
A. No. You can give any amount under this provision, as long as it is $100,000 or less this year. If your IRA is valued at more than $100,000, you can transfer a portion of it to fund a charitable gift.
P.S. QCDs can only come from IRAs, not 401k or 403b accounts. RMDs are still required on those accounts and must be taken out, just can’t directed to charity as a QCD.
NEXT STEPS
Contact KYRS for additional information on giving an IRA gift. 747-3012.
Seek the advice of your financial or legal adviser.
Ask your IRA administrator about making a direct transfer to Thin Air Community Radio or have the administrator send a check from your account to us. (To be tax free, the donation must go directly from your account to Thin Air Community Radio without passing through your hands.)
Legal Name: Thin Air Community Radio
Address: 35 W. Main, Suite 340, Spokane, WA 99201
Federal Tax ID Number: 20-5354265
The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.