If you are over 70 and 1/2 years old, you are required to take a minimum amount from your traditional IRA every year before December 31. This withdrawal (called the Required Minimum Distribution, or RMD) is taxed at your current income tax rate. If you are in a situation where you do not need your RMD income, if your tax bracket is still high, or if the RMD will push you into a higher tax bracket, there is another option for your RMD.
Set to expire on December 31, 2013, section 408(d)(8) of the Internal Revenue Code allows for Qualified Charitable Distributions (“QCD”) directly from your IRA to a charity of your choice. You can give up to $100,000 of your RMD, a portion of your RMD, or any amount above your RMD. While you cannot take a charitable deduction for this amount, the amount that you give to the charity does not count toward your adjusted gross income.
If you are thinking about making a QCD from your traditional IRA, please contact your accountant or financial professional.