If you are 70 1/2 or older, you can make a charitable gift directly from your IRA without paying income tax on the withdrawal.
How it works
Sam, age 78, has $500,000 in an IRA. He doesn’t need the entire $24,600+ he’s required to take this year, and he doesn’t want to pay tax on that amount. Required minimum distributions (RMDs) are withdrawals you have to make from most retirement plans (excluding ROTH IRAs) when you reach the age of 72 (or 70.5 if you were born before July 1, 1949). The amount you must withdraw depends on the balance in your account and your life expectancy as defined by the IRS.
Sam authorizes the administrator of his IRA to transfer $20,000 to Surrey and $5,000 to himself. The $20,000 counts toward his annual minimum required distribution plus he avoids having to pay tax on it.
You can transfer up to $100,000 per year to charitable organizations. The amount transferred is excluded from your adjusted gross income (AGI) and counts toward your minimum required distributions for the year.
For more information about giving gifts from an IRA, please contact your financial advisor. For details about making a gift to Surrey, call Karen McNamara at 484-321-6104 or firstname.lastname@example.org.