Understanding Changes to Giving from your RMD

Written by Bill Ryerson.

Some PMC donors have reached the magical age of 70 1⁄2 when required minimum distributions (RMDs) from IRAs begin to happen. And now that many donors have lost the ability to itemize charitable contributions with the recent tax legislation, I was happy to learn that there is still a tax-advantaged way to give. An RMD is often taxable income and can even raise the recipient to a higher tax bracket. But one can arrange for a portion of the distribution to be given directly by the administrator of the traditional IRA or Roth IRA to a public charity, thus reducing taxable income dollar for dollar for the amount of the gift. Such gifts can be any amount up to $100,000.

The term for such a gift is a Qualified Charitable Distribution (QCD). The QCD counts towards the required minimum distribution Some retirement accounts, like a 401(k), 403(b), Keogh or SEP, do not qualify. But it is possible to roll over one of these accounts into an IRA to use RMDs for charitable giving in the future.

If an IRA consists of both pre- and post-tax dollars, it is possible to use just the portion that would generate income tax in QCDs. It’s a good idea to plan in advance so the IRA administrator has time to process your QCD request, which should include the charity’s tax ID number and address. PMC’s tax ID is 03-0358029.

There are also other considerations related to use of QCDs. For example, it may be beneficial to take a required minimum distribution in cash and donate appreciated stock to a charity, avoiding capital gains taxes. So, seek the advice of your financial advisor. But remember to consider making a QCD from your RMD.