Donating through an IRA Account
A new provision of the Tax Cuts and Jobs Act passed in late 2017, which became effective for 2018, doubles the standard deduction and may make itemization less beneficial to some taxpayers. This becomes a planning opportunity for taxpayers over 70½.
Required Minimum Distributions
If you are over 70½, the Internal Revenue Service requires that you withdraw a minimum amount, called a Required Minimum Distribution (RMD), from your traditional or rollover IRA. This amount is taxable to you.
The IRS has created another option that may prove beneficial. You may instruct your IRA custodian to directly send all or part of your RMD to a 501(c)(3) charity such as The Bridge Fund (TBF). It is called a Qualified Charitable Deduction (QCD) and counts toward your RMD.
This distribution must be sent directly from the account to TBF. The distribution to TBF is not taxable to you.
There are three distinct advantages to using a QCD. The first is that even if you do not itemize deductions (and this is much more likely under the new, expanded standard deduction), you still receive the full deduction of the charitable contribution.
The second is that it reduces your Modified Adjusted Gross Income (MAGI) which is used to compute your Medicare supplemental premium. Thus, contributions to TBF reduce your taxable RMD, and therefore your MAGI, and may reduce your supplemental Medicare premium. Those savings can be significant.
Finally, your donation helps more neighbors in need because you are contributing pre-tax dollars—no tax to you, and a larger gift to TBF.
Consult your tax or legal counsel for advice.
The Bridge Fund EIN: 45-4745677