Consider Making a Gift to JFS Through Your 2023 IRA Distribution

Here’s a tax-smart idea that supports JFS of WNC! 

Take great advantage of a recent tax break that will make a difference with your IRA. Use your Required Minimum Distribution (RMD) as the Qualified Charitable Distribution (QCD) for a tax- free gift to JFS of WNC.  

At the end of December 2022, a new tax act, The Secure Act 2.0 was signed into law. Among the many provisions, the law created a terrific opportunity for nonprofit, charitable supporters to use their IRAs for a tax-free contribution.

If you are age 73* or older, IRS rules require you to take required minimum distributions (RMDs) each year from your tax-deferred retirement accounts. If you have an IRA, the required age to begin distributions increased to age 73 from 72; you must start withdrawing money from your IRA. These withdrawals are called Required Minimum Distributions (RMD). They have the effect of increasing your taxable income. In many instances, these RMDs can push you into a higher income tax bracket and cause your Social Security payments to become taxable.      

Instead of taking the Required Minimum Distribution (RMD) from your IRA, tell your IRA provider to send any or all of the distribution to JFS of WNC a 501(c)3 organization.   

Your gift will not count as income, thereby saving thousands of dollars in higher taxes, and the IRS will still consider that you fulfilled your Required Minimum Distribution obligation. 

Your IRA just became a very valuable Charitable Giving Account. Help make a difference in your community and save tax dollars.  

More About Charitable Distributions

A qualified charitable distribution* (QCD) is a direct transfer of funds from your IRA, payable directly to a qualified charity, as described in the QCD provision in the Internal Revenue Code. Amounts distributed as a QCD can be counted toward satisfying your 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 you take a withdrawal, the funds would be counted as taxable income even if you later offset that income with the charitable contribution deduction.

Why is this distinction important? If you take the RMD as income, instead of as a QCD, your RMD will count 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, charitably inclined investors 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.

*JFS does not provide tax or legal advice.  Please consult with your attorney, tax advisor and/or financial consultant to confirm that a QDC is appropriate for you.