Charitable Giving

At this time of year, when most of us are giving thanks and counting our blessings, we become all the more aware that there are so many people in need, both locally and globally, and that charities are crying out for help.

But did you know that, if you are at the age where you are required to take Required Minimum Distributions (RMD) from your IRAs, there is a win-win option that benefits both you and the charity? By donating part (or all) of your RMD directly to charity, the taxable portion of your RMD is reduced by the amount donated. This is called a Qualified Charitable Distribution (QCD).

To make this happen you need to provide your financial institution or tax advisor with information about your charity (name, address, EIN number) and the amount you want to donate. Some of the larger financial institutions allow you to do all of this online. The institution will then write a check directly to the charity of your choice and you will be entitled to the deduction. Note, it must be a registered charity.

Be sure to keep records of how much you donate to charities via QCDs during the year! You should be aware that the 1099-R you receive for your IRA after the end of the year will not show the QCD portion of your distribution separately. But don’t be alarmed. There is a line on the tax return (and on the tax software) to enter the appropriate amount from your records to ensure you get the deduction.

Most, but not all, IRAs qualify for this program. Contact your tax advisor or financial institution for complete information. Please click here to go to the IRS website for more information.

Not old enough to have RMDs or choose not to donate from them? If you are among the few people who still itemize deductions on tax returns, charitable deductions are still available to you as a way of reducing your tax liability. Although there was a small deduction available in 2020 and 2021 to all taxpayers who do not itemize, as of the time of writing this, it has not been extended to 2022.

Happy Thanksgiving! Perhaps we can all find a way to do more giving when there is a way to benefit both the charity and ourselves.

-Submitted by Tax-Aide Volunteer