Year-End Tax Saving Tip: Donating Your RMDs to Charity
If you are age 70 ½ or older and have charitable intentions, waiting to take your Required Minimum Distributions (RMDs) till the end of the year may be in your best interest. For the past several years, people who are age 70½ or older have been able to make a direct, tax-free transfer of up to $100,000 annually from their IRAs to charity and do not have to report it as income on their tax return. If you are married, you and your spouse may both transfer $100,000 for a total of $200,000.
This is a great tax advantage for certain taxpayers. In order to qualify, the distribution must go directly from your IRA custodian to the charity. It is important to note that you may not take a distribution from your IRA and then contribute it to a charity and consider that transaction a Qualified Charitable Donation (QCD).
Congress has not approved this IRA tax break yet and typically waits until the last minute to pass it through. If you are an IRA owner interested in doing a QCD, you may consider doing the transaction now even though QCDs have not yet been extended for 2015. As long as the correct procedures are followed and Congress does bring back QCDs, the transaction should quality. If nothing else, you will have satisfied your RMDs. Let’s hope Congress approves the QCDs for this year.