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Donating through an IRA Account


A new provision of the Tax Cuts and Jobs Act which became effective for 2018, doubled the standard deduction and made itemization less beneficial to some taxpayers. However, other laws that apply to IRAs and other qualified retirement plans may have unexpected tax consequences.  Others may create opportunities to support The Bridge Fund (TBF) in a tax-advantaged way.

Required Minimum Distributions

If you attained age 70½ before 2020, the Internal Revenue Service requires that you withdraw a minimum amount, called a Required Minimum Distribution (RMD), from your traditional or rollover IRA. For younger taxpayers, the RMD withdrawal rules will apply to the year in which you reach age 72.  The RMD amount is taxable to you, and could potentially cause you to be in a higher tax bracket.  

However, 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 TBF. This is called a Qualified Charitable Deduction (QCD) and counts toward your RMD.  This distribution must be sent directly from your account to TBF and is not taxable to you.  


In addition, taxpayers who are 70-1/2 and wish to make a charitable contribution with pre-tax dollars may still make a QCD.  These contributions, which reduce the balance of your account, mayy decrease the amount of later (taxable) RMDs. 


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 with the new, expanded standard deduction), you still receive the full deduction of the charitable contribution.


The second is that, for those subject to the RMD rules, your QCD 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

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