IRA Required Minimum Distribution

Giving Through Your Required IRA Minimum Distribution

If you are 72 years old or older, you are required to take a distribution from your qualified retirement account. This is referred to as a Required Minimum Distribution (RMD). With the recent changes in standard deductions, there can be a substantial tax benefit by making charitable deductions from your RMD. For example, if your Required Minimum Distribution is $100,000.00, and you would make charitable gifts from your RMD in the amount of $20,000.00, this would reduce the taxable income from the RMD to $80,000.00. If you then applied the standard deduction of $27,000.00, your taxable income would be reduced to $53,000.00.

On the other hand, using the same distribution of $100,000.00 as an RMD, and you itemize your deductions, and let’s say you have a $20,000.00 charitable deduction and another $15,000.00 in additional qualified deductions, your total deductions would be $35,000.00 and your income would be $100,000.00, leaving $65,000.00 in taxable income. Under this scenario, you would be paying tax on $12,000.00 less if you used your RMD to make charitable contributions. Please note that the checks must be made out directly to the charities from your IRA Trustee.