With each new year usually comes a fresh overview of the year ahead, which may or may not include one large milestone: retirement. While your retirement savings account such as an IRA may be the largest monetary asset you earn in your lifetime, you may find you are not in need of all the funds gathered in these accounts and want to continue (or begin) making charitable donations to a qualified organization of your choice. Can you make a charitable donation right from your IRA? Yes, you can, and along with it comes a nice tax advantage.
Thanks to the Secure 2.0 Act of 2022 recently passed by Congress, the age for Required Minimum Distributions (RMDs) rose to 73 in 2023. Once you reach that age, an RMD must be withdrawn from your IRA each year, with income tax being due on each distribution. For some, this may be an unnecessary – and unwelcome – expense.
Should you choose to make a charitable donation right from your IRA, otherwise known as a “Qualified Charitable Distribution,” you can avoid some or all of that income tax. Individuals aged 73 or older taking annual RMDs can donate up to $100,000 annually of their RMD without paying income tax on the transaction. Filing jointly with your spouse? Couples can exclude up to $200,000 of their IRAs from income tax if they make a Qualified Charitable Distribution.
This exempt distribution has a twofold advantage – it allows you to meet your charitable goals and allows you to satisfy your annual RMD requirements without facing unnecessary income tax.
For more information concerning qualified charitable distributions, please contact Morgan Schweighoefer at (216) 621-7860, or by email at [email protected].