Make Charitable Donations Directly from Your IRA & Help Improve Your Wellbeing

Have you ever had that “feel good” sensation after volunteering or donating to charity? If you have, it makes sense. In fact, donating to charity can help improve your psychological wellbeing.

If you have an individual retirement account (IRA), donating to charity may have just gotten easier. Not only can making qualified charitable distributions from your IRA help meet your required minimum distribution (RMD), but it can also help meet your personal philanthropic goals.

Making tax-free charitable donations directly from your IRA is easy; here are some tips aimed at helping you along the way:

You don’t have to wait until you’re required to take an RMD. The recent Secure Act pushed out the RMD age, so you’re no longer required to take distributions at age 70 ½. You can still make non-taxable IRA distributions to charities, however. Spending down your IRA before you reach RMD age may reduce future taxes.

Writing off donations may not impact your taxes anymore. Due to recent tax law changes, most people don’t itemize deductions. If that’s the case and you’re claiming the standard deduction, your donations may no longer reduce your taxes.  However, when you make qualified charitable distributions from your IRA, you avoid taxes altogether.

You can make charitable donations directly from your IRA. The charitable distributions from your IRA must go directly to the charity. To simplify this process, you can get a checkbook linked to your IRA or you can send a check directly with the help of your financial advisor. Remember, qualified charitable distributions are limited to $100,000 annually. Also, be sure to track your qualified charitable distributions and let your tax preparer know the amount to exclude from any IRA distributions reported on your 1099-R.

Incorporate charitable giving into your estate plan. There can be significant tax advantages to making qualified charitable donations as a part of your estate plan. By working with your estate attorney and financial advisor, you can plan to donate retirement assets and help reduce the amount of estate taxes.

The recent tax law changes have made the tax benefits of giving to charity harder to achieve. Talk to your financial planner about qualified charitable donations and other strategies to help maximize the tax benefits of your donations.  

Disclosure:

Marshall Financial Group, Inc (“Marshall Financial”) is an SEC-registered investment adviser with its principal place of business in Doylestown, Pennsylvania.   This newsletter is limited to the dissemination of general information pertaining to Marshall Financial Group’s investment advisory services.  Investing involves risk, including risk of loss.  References to market indices are included for informational purposes only as it is not possible to directly invest in an index. The historical performance results of an index do not reflect the deduction of transaction, custodial, and management fees, which would decrease performance results. It should not be assumed that your account performance or the volatility of any securities held in your account will correspond directly to any comparative benchmark index.

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