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All about qualified charitable distributions – The Suffolk News-Herald

Written by Mark McGahee

Do you have an IRA? As you enter the 70s, you may begin to look at the IRA not only as an asset, but also as a problem. By law, you must order a minimum distribution from a traditional IRA when you turn 72; there are very few exceptions. The downside of these distributions? All distribution is taxable. (You never have to take the required minimum distributions from a Roth IRA, provided you are its original owner.)

While the income from the required minimum distribution is nice, the associated taxes can be a headache. Relief from that headache might be available to you. Did you know that you can potentially meet some or all of your annual minimum distribution needs in a way that will help you manage your taxes and charitable impact?

Consider a qualified charity distribution. This is a direct transfer of assets from the IRA to a charity or non-profit organization of your choice. The organization must be exempt from internal income tax under Section 501 (c) (3).

Sometimes referred to as an IRA charity gift, these distributions aim to accomplish two things. First, it gives you the opportunity to add up to $ 100,000 to charity or charity in one year. Second, you can calculate the full amount of the distribution according to your minimum distribution for the year, and the qualifying amount of the charitable distribution may not be included in your gross income.

You must be at least 70½ years old to make a qualified charity distribution. You may want to coordinate this distribution with the help and guidance of a financial expert, because if you improperly manage the transfer of assets between your IRA and a charity, the tax credit you hope for may be lost. You also need to provide enough time for the transfer of assets to take place, which means that these distributions are best organized before the very end of the calendar year.

In 2020, the age limit for investing money in a traditional IRA was abolished, and some senior IRA owners wondered if they could make a distribution to charity and at the same time characterize it as an IRA contribution. The IRS said no to that.

Still, a qualified charity distribution is a choice you should look at, especially if you mean taxes when you think of your mandatory annual IRA distributions. It should be borne in mind that the tax treatment of the IRA may vary from year to year and please note that this article is for informational purposes only and does not constitute actual advice. If you are interested in a qualified charity distribution, consider talking to a financial expert before making any move.

You can reach the McGahee brand at 757-539-9465 or mmcgahee@isgva.com.