Generally, if you are at least 70.5 years of age, IRAs can be excellent assets for making current gifts so long as you understand and follow the withdrawal and taxation rules carefully.
Example: Ralph and Marge are in their late 70s and want to give a generous gift to their favorite ministry for the current campaign. They are doing well living on their fixed income payments and find that they really do not need the income from the required minimum distributions (RMD) they must take from their IRAs.Â
After learning of the qualified charitable distribution provision in the tax code, Ralph and Marge each instructed their IRA custodian to send a distribution equal to this year’s RMD directly to the ministry to help with the campaign. While they will not receive a charitable tax deduction for the gift, they won’t have to claim the distribution as income – giving them essentially the same tax benefit.
In addition, Ralph and Marge are planning to use the qualified charitable distribution in coming years to increase their generosity. If they ever find they need the RMD (or more), they will simply not request the distribution to charity, retaining the income for themselves.
The qualified charitable distribution provision in the tax code allows you to have your IRA custodian send a distribution directly to your chosen ministry rather than to you. Since you don’t receive the distribution, you will not have to claim it as income. Further, the distribution can count toward your RMD for the year of the distribution.
