IRAs

With the recent changes in the tax code, you might be wondering what the most tax-effective ways are to continue to give to your favorite charities. If you are over 70½ and you have an IRA, we have a great option available to you.

Charitable giving from an IRA

When IRA holders reach the age of 70½, they must start taking a Required Minimum Distribution (RMD) from their IRA. When they take that distribution, they have to add it to their adjusted gross income (AGI) and pay federal taxes on it.

There is a more tax-efficient option you should consider. You can direct your IRA custodian to make a tax-free gift directly from your IRA to a qualified public charity, such as a 501(c)3 organization like UW-Whitewater Foundation, Inc.

This Qualified Charitable Distribution (QCD) will not count as income for the donor, so no additional taxes are incurred and no higher tax bracket looms. However, the QCD can count toward satisfying the donor’s RMD.

When you do your taxes, it is important to report the amount of the QCD to the IRS so you don’t get taxed on the withdrawal. The QCD should not be reported as income. IRA custodians are not required to report this information on their 1099-R, so it is up to you to report it.

How does it work?

Using the UW-Whitewater Foundation, Inc. as an example of a qualified public charity, an IRA holder contacts their IRA custodian and requests the custodian donate from their IRA account directly to the UW-Whitewater Foundation, Inc.

Up to $100,000 can be donated from an IRA account tax-free. The gift must go directly from the IRA custodian to the charity, and the amount of the gift satisfies all or part of the RMD.

The IRA-holder would then contact the UW-Whitewater Foundation, Inc. to let us know the gift is coming and to indicate which fund or funds it is intended to support. That’s it!

Remember - Your gift must be processed by Dec. 31 to receive the benefit for that year. And, if you are married, your spouse is also eligible to contribute up to $100,000 from their IRA. Please consult with your tax preparer or financial advisor to learn what is best for you.

Contact us for more information about making a qualified charitable distribution from your IRA.

Greg Rutzen
(262) 472-3182
rutzeng@uww.edu