Skip to main content

Scott Thomas, ChFC®, CAP®, CKA®, RICP®

Qualified Charitable Distribution From IRA-Not Always Easy

Not All IRA Custodians are Friendly About Qualified Charitable Distributions

Those individuals age 70 ½ and old can give directly from IRA to Qualified Charity and it counts towards their required minimum distribution aka RMD and it will not be counted in taxable income.   This can be significant strategy especially with higher Standard Deductions when calculating itemizing tax potential.  Couple has $5,000 in property taxes and likes to give $5,000 to annual to charity. The new $26,600 standard deduction means $10,000 of itemized write offs will not exceed or count.

If they simply take the RMD amount and their tax rate is 15% on the $5,000 then it cost them extra $750 in taxes that was unnecessary and could have been avoided. Said another way they could have given $750 more without a change in cash flow or assets. This strategy should be called “smart giving from an IRA.”

Next step you reach out to your IRA provider or your advisor and ask to do this very simple strategy.  Some IRA custodians are not friendly towards making this simple.  Some will require the donor to reach out to the charity and have them write a letter of acceptance on letterhead and signed by executive officer of charity. Some may say they do not do it.  It might be a red flag if your advisor tells you I do not know and will have to get back with you.  It seems interesting that the industry which praises the contributions to Individual Retirement Accounts aka IRA are not leaders when it comes to distribution strategies for those IRA’s.  Know this some custodians really get this and make the process super easy for you and do not require any special letters or processes. Reach out to me if you are having difficult time and would like to accomplish this tax savvy strategy as well.

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck