It’s the time of year many people conduct their charitable giving. If you’re one of those people, you know there are several good causes and great organizations in our community doing important work.
Sometimes, though, you might find you have causes you want to support but not enough income to feel comfortable doing so. However, there is a way of giving you may have overlooked.
If you are 70 ½ or older and have an Individual Retirement Account (IRA), rather than making an end-of-year gift from your income, you can give money you already have set aside by using your IRA. You can direct your IRA administrator to transfer money directly from your account to your favorite charity.
Any amount you transfer will count toward your Required Minimum Distribution (RMD). In fact, you can transfer up to $100,000 (per person) to a qualified charity this year.
IRA rules mandate that you take a RMD, and you will face penalties if you don’t. Your age and account value determine the amount you must withdraw. But if you take a distribution from your IRA, you will likely pay more in taxes and may even reach a higher tax bracket.
After years of back-and-forth decisions, two years ago Congress made a permanent change in the law. You are allowed to make an IRA charitable rollover and use it to meet your RMD. If you were planning to make a charitable contribution anyway, it makes sense to make the contribution with money you don’t have to pay taxes on, rather than paying the taxes before making the contribution!
It’s important to make sure the IRA distribution passes directly to the qualified charity and not into your hands first. If the distribution comes to you first and then you give it to charity, you will have to count the distribution as income and pay income tax on it.
It’s easy to make a gift from your IRA. Contact your IRA administrator, who can provide the forms you need to complete with the gift amount and charity noted on them. You’ll need the name and address of the qualified charity or nonprofit organization because the check will be sent directly to it.
You will pay no income tax on the amount you transfer, but because you are not claiming the transferred amount as income, you will not receive an income tax deduction for your gift.
You can also contact the Harrison County Community Foundation (HCCF) to see if your intended charity has an endowment fund and make the gift directly to the foundation, specifying it for that particular fund. The same procedure applies for using the IRA rollover as your giving vehicle.
If you’re trying to decide the best use of your charitable dollars, contact the foundation at 812-738-6668 to learn about the different types of nonprofits that partner with us and causes we support.
HCCF can accept many different kinds of gifts, so don’t think a charitable contribution must be cash, a check or securities. Gifts of agriculture products, such as livestock, grain or timber, might appeal to you if you have those assets. In addition, the foundation can accept gifts of real estate and partial interest, such as a life estate.
Remember when making an end-of-year gift that you don’t want to wait too late. Be sure you allow some time to process an IRA distribution request or other types of gifts, such as a transfer of stock. All charitable gifts must be received by the charity no later than Dec. 31 if you plan to claim a tax deduction in the current calendar year.
And don’t forget that qualified gifts to HCCF may be eligible for either a dollar-for-dollar or even two dollars-per-dollar match. That’s just icing on the holiday cake!