15 Oct Qualified Charitable Gifts in Support of Local Trails
If you are over age 70 ½, you probably know that you are required to start withdrawing funds from your IRA. These funds are taxable as income, but we’d like to offer you a way to support the Trails Council while avoiding taxes on these withdrawn funds. Here is some information from the IRS website:
How much must I take out of my IRA at age 70 1/2?
Required minimum distributions (RMDs) must be taken each year beginning with the year you turn age 70 1/2. The RMD for each year is calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. This rule does not apply to your Roth IRAs.
What is a qualified charitable distribution?
Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. See Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs)) for additional information.
Can a qualified charitable distribution satisfy my required minimum distribution from an IRA?
Yes, your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA. For example, if your 2014 required minimum distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2014, you would have had to withdraw another $5,000 to satisfy your 2014 required minimum distribution.
Here’s an example of how this would work: You authorize $1,000 from your Required Minimum Distribution to go to Top of Michigan Trails Council. Your IRA administrator issues a check that will be sent directly to the TOMTC office to go directly into their account. TOMTC lists you as the donor. This is not a deduction, it is a pre-tax gift. It is not reported income since you never received the $1,000 as income. But the $1,000 will count toward your RMD (required minimum distribution). TOMTC will then issue you a special receipt to acknowledge your gift.
If you are still looking at meeting your required minimum distribution for this year, please consider local trails as the beneficiary of your qualified charitable distribution! Ask your financial advisor for assistance with this process.