Using Your IRA for a Tax-Free Donation
With all the tax law changes and deduction increases using the tax benefits that charitable donations can provide may have become a little more complicated. But, there are ways that you can continue to give to the causes close to your heart while also reducing your tax bill. One way is using your IRA required minimum distribution as a tax-free donation. There are a few requirements to meet in order to take advantage of using a qualified charitable distribution to help Blue Ridge Humane’s mission and reduce your tax bill.
- Qualified charitable donations (QCD) can only be made from an IRA. Traditional, Rollover, Inherited, SEP (inactive plans only), and SIMPLE (inactive plans only) plans qualify for QCD. Under certain circumstances, a QCD may be made from a Roth IRA, but consult with your financial advisor to determine what is best on your situation. Funds can also be rolled over into an IRA from other plans in order to take advantage of the tax benefit.
- You must be 70 1/2 years of age or older. The QCD must be made by the end of the year unless you have just turned 70 1/2–First-timers have until April 1 of the year after turning 70 1/2 to take an initial required minimum distribution (RMD) or QCD.
- Individuals can transfer up to $100,000 per year. If you file a joint tax return, your spouse can also make a charitable contribution of up to $100,000.
- Funds must be transferred directly from the IRA to an eligible charity by the IRA trustee in order to qualify for the tax break. Talk with your IRA administrator on how to set this up.
- If your RMD has already been processed you can’t use it for a QCD that year, meaning you’ll have to wait until the following year.
- A charity must be a 501(c)(3) organization in order to receive tax-free IRA charitable contributions. The Blue Ridge Humane Society is a 501(c)3 non-profit animal welfare organization. Gifts are fully deductible under the limits of the applicable tax laws. Our Federal ID is # 56-6048726.
Discuss how to take advantage of the tax benefits of using your required minimum distribution as a donation with your financial advisor before taking any steps to ensure that you follow the requirements and receive the maximum benefit! You can rest assured knowing your gifts are helping find homes for needy animals in our community every single day.