Two Simple Ways to Make Tax-Wise Charitable Gifts from Your IRA

Posted April 2024

When it comes to making a charitable gift to support our work, many of our donors are motivated by their desire to make a positive impact on our mission. Some smart ways to give also offer tax benefits, including giving through an individual retirement account (IRA). Below are two options to consider:

Qualified Charitable Distributions

Individuals aged 70½ and older have the opportunity to use their IRAs to make a charitable gift. Why do this? Those aged 73 and older must take an annual required minimum distribution (RMD) whether they need the money or not. This income is taxable when received, which creates a tax liability. A qualified charitable distribution (QCD) eliminates this tax liability and thus serves the same function as an income-tax charitable deduction.

What is appealing about the QCD is its simplicity. To achieve the same result with a less direct gift from your IRA, you would take the distribution, make the gift to the charitable organization, and then have to itemize your deductions to offset the tax liability.

For example, if you take a distribution of $10,000 from your IRA and are subject to a 32% income bracket, you will pay $3,200 in income tax. If you then gift the distribution to a charitable organization, you will receive a $10,000 charitable deduction—which, in your 32% income-tax bracket, will save you $3,200 in taxes if you itemize your deductions. The QCD will achieve the same results with less hassle and can be particularly attractive for those who do not itemize.

Beneficiary Designations

Individuals aged 18 and older can make a gift from their IRAs. While those under the age of 70½ cannot currently make a QCD gift, everyone—regardless of age—can designate a charitable organization as the beneficiary of an IRA. This is a gift that takes effect after your lifetime, so you will have a future impact.

Oftentimes, charitably minded individuals will leave IRA assets to a charitable organization like ours, which is tax exempt, and leave other assets to heirs so as to avoid the tax consequences. Usually, you need to complete a beneficiary-designation form that you can obtain from your IRA administrator.

Consider sharing information about your future gift with our organization. You may also wish to inform us of your desire to restrict your gift to a particular area. We would be pleased to invite you to join our legacy society.

We would be pleased to speak with you about the options for and benefits of making a gift from your IRA to support our mission.

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