Charitable RMD’s are a great legal method to take tax-free distributions from your IRA.

It’s that time of the year when Required Minimum Distributions (RMD) start to be a hot topic.  An RMD is when when Uncle Sam comes and says “Thanks for saving all your tax-deferred money for retirement. It’s now time for us to get our fair share.”  This time of year is also the time when charities start their end of the year push for donations. Well, with the beauty of is called a Qualified Charitable Distribution (Charitable RMD), you can kill two birds with one stone.

A charitable RMD is a great tool for not only meeting your RMD requirement, but also for meeting your charitable giving goals for the year.

The process of doing a charitable RMD is simple. Basically, you are transferring your RMD (or a portion of your RMD) directly from your IRA to the charity (or group of charities) you have chosen.  You will NOT the RMD sent to you and then turn over the check to the charity. This defeats the purpose and will be considered a taxable distribution. By directing the RMD from your IRA to the charity you’ve chosen; you have fulfilled your RMD for the year, made a charitable contribution, and reduced your taxes by the amount of your RMD contribution.

Just a few specific rules to mention:

  • You cannot do this before turning 70 1/2. (The SECURE Act does not affect this age)
  • The maximum amount for a Charitable RMD is $100,000 annually.
  • The RMD must be completed by December 31st.
  • You must have the distribution go directly from your IRA to the charity. The check needs to be made out to the charity also.

This is a great tool I feel will often go unused.

Lets chat about your personal goals