Details to note:
- Does the law include transfers from 401K’s or other pension accounts besides IRAs? The answer is no. A Qualified Charitable Distribution must come – and must come directly - from an IRA account.
- Is there a limit on the contribution? If you’re 70 ½ or older, you are allowed to transfer up to $100,000 to charity tax-free each year, even if that is much more than your RMD. Your RMD for the year will have been satisfied, and the rest will not be included in your adjusted gross income.
- You cannot “double dip” by also deducting the money you’ve transferred to the charity as a charitable deduction.
- You cannot withdraw the money from the IRA and then write a check to the charity; the money needs to be transferred directly from the IRA to the charity.
- Because making a tax-free transfer (rather than taking your RMD) keeps the money out of your adjusted gross income, you help avoid the Medicare high-income surcharge.
- Keeping money out of adjusted gross income can mean less of your Social Security benefits might be taxable.
When it comes to IRAs, we don’t want you to miss out on any of the details, cautions, or benefits!
- by Rebecca W. Geyer