Qualified Charitable Deduction

If you are 72 or older, the IRS requires you to take required minimum distributions (RMDs) each year from your tax-deferred retirement accounts. For some, there are tax advantages in making a gift to Wyoming Catholic Ministries Foundation directly from their retirement account in what is typically called an "IRA Rollover".

An IRA Rollover or Qualified Charitable Deduction (QCD) is a direct transfer of funds from your IRA, payable directly to a qualified charity. Amounts distributed as a QCD can be counted toward satisfying your Required Minimum Distribution (RMD)for the year, up to $100,000. The QCD is excluded from your taxable income. This is not the case with a regular withdrawal from an IRA, even if you use the money to make a charitable contribution later on. If your investment manager issues a check payable to you - the funds are counted as taxable income even if you later offset that income with the charitable contribution deduction. Instead, the check should be made payable to the charity of your choice.

Why is this distinction important? If you take the RMD as a check to yourself, instead of making a QCD gift with a check from your broker directly to a charity, the IRS will count it as taxable income. This additional taxable income may push you into a higher tax bracket and may also reduce your eligibility for certain tax credits and deductions. To eliminate or reduce the impact of RMD income, you may want to consider making a qualified charitable distribution (QCD). For example, your taxable income helps determine the amount of your Social Security benefits that are subject to taxes. Keeping your taxable income level lower may also help reduce your potential exposure to the Medicare surtax.

For more information, consult your financial advisor or contact us.

Wyoming Catholic Ministries Foundation does not seek to offer professional tax, legal or accounting advice. Please consult a qualified professional advisor.