Tax-WISE giving…and avoiding penalties

How a Qualified Charitable Distribution from an IRA Works.

Normally, when you take a distribution from a traditional IRA, you pay taxes on it since you didn’t pay taxes on the money when you put it into your IRA. But if you are age 70½ or older and make a contribution directly from your traditional IRA to a qualified charity, you can donate up to $100,000 without it being considered a taxable distribution.

To avoid paying taxes on the donation, you must follow the IRS’s rules for qualified charitable distributions (QCDs), also called charitable IRA rollovers. Most nonprofit charities like Minnesota Masonic Charities (wink wink) are qualified charities. The charity you give to will not have to pay taxes on your donation.

You can also use your qualified charitable donation to meet all or part of your IRA’s required minimum distribution (RMD) for the year. Traditional IRA owners must start taking RMDs at age 70½ or face tax penalties. The charity must receive your donation by Dec. 31 for you to apply it to that year’s tax return.

If you have any question, please call John Schwietz at Minnesota Masonic Charities 651-210-5240 or email him at john.schwietz@mnmasonic.org.