Tax-Smart Charitable Distributions from Retirement Accounts
[by Greg Rupert]
Don’t miss out on a generous income tax breaks when you give to Seattle Unity! These two tax-smart ways may make sense for your giving:
- Donate highly appreciated stock and eliminate the capital gains tax you would incur if the shares were sold in a taxable brokerage account. The shares would be sold by Seattle Unity after your donation and will be free from paying federal income tax. A donation of the stock directly to a charity eliminates capital gains taxes and you can increase the amount available for Seattle Unity and generate tax savings for yourself.
- The Qualified Charitable Distribution Rule. The QCD rule allows owners of a traditional IRA to exclude Required Minimum Distributions (RMDs) from their adjusted gross income (AGI) if they give the money to an approved charity, also known as a qualified charitable organization.
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- Under the QCD rule, you can give an amount from your IRA directly to charity without receiving it as income. That enables you to donate the full amount that you withdraw rather than what’s left after you pay the individual income tax due on the funds you withdrew.
- In addition, you can start taking QCDs at age 70½; you don’t have to wait until you reach age 73. But when you reach 73, the age at which you must begin taking RMDs, QCDs count as part of your annual RMD amount.
What to do next:
Discuss your philanthropic goals and potential giving strategies to Seattle Unity with financial, tax, or legal advisors.