Tax-Wise Giving Strategies, Part 3 – Gifting Required Minimum Distributions

In part 3 of this series, I discuss how gifting required minimum distributions is a great way to give to charities, especially for those that typically cannot itemize their charitable deductions.

Gifting Required Minimum Distributions (RMDs) – When you turn 72 years old, you are required to start taking money from your tax-deferred retirement accounts, like IRAs. When you take money out, these distributions are generally taxable. However, you can gift part of your RMD directly to charity, and the distribution is NOT taxable if done correctly.

Example: Bob and Jane give $5,000/year to charity. They also have IRAs that have required minimum distributions of $40,000 in 2022. They gift $5,000 of the RMD tax-free to charity.

Gifting your required minimum distribution allows for you to get a tax benefit for your charitable donation while also directly lowering your adjusted gross income, which can help lower Medicare premiums and make you eligible for other income-based tax credits and deductions!

However, tax reporting can be difficult because the tax document for your retirement account, generally a 1099-R, does not report the distribution to charity as non-taxable. It is up to you or your accountant to accurately report it on your taxes!

Thank you for reading,

Alex

This blog post is not advice. Please read disclaimers.