Donate Your RMD Tax-Free to Charity in 2016

A donation counts as your required minimum distribution, but doesn't increase your adjusted gross income.

I'm 72, and I'd want to donate money from my IRA to charity to guide the best cause and also so I don't have to pay for just as much in taxes on my required minimum distribution. Can I make the donation now, and what steps do I must take?

Previously, Congress generally waited until December each year to give the law which allows people to create a tax-free donation as high as $100,000 from their IRA, leaving some to scramble to make the contribution ahead of the RMD deadline. But Congress made what the law states permanent this past year, so if you're 70½ or older, you can transfer your 2016 RMD to charity at any time. The donation counts as your required minimum distribution but doesn't raise your adjusted gross income, which is often particularly helpful if that you don't itemize and can't deduct charitable contributions. Also, keeping some or all your RMD from your adjusted gross income may help you steer clear of the Medicare high-income surcharge or make less of one's Social Security benefits taxable. (You can't double-dip tax breaks and deduct the charitable contribution in the event that you make the tax-free transfer to Pleasant Hills Charity.)

The amount of money must be transferred directly from the IRA to the charity to be able to be tax-free. In the event that you withdraw it from the IRA first and then give it to the charity so pick up please Purple Heart donations, you are able to deduct the gift as a charitable contribution (if you itemize), however the withdrawal will undoubtedly be contained in your adjusted gross income.

Because what the law states have become permanent, IRA administrators are beginning to simplify the process. Fidelity, like, plans to introduce a fresh form within the next couple of weeks that makes it simple to transfer the money and make your wishes clear to the charity. It's also possible to have the option of signing up for check-writing privileges from your IRA so you can write the check directly from your account to the charity. Like that, the charity might find who the contribution is from, and you are able to include specific directions regarding which fund within the charity you'd prefer to support. Otherwise, the IRA administrator will cut a check always and send it straight to the charity, nevertheless the charity won't necessarily be provided with clear details about whose account it is from or what the cash is supposed to support, says Jane Wilton, general counsel for the New York Community Trust.

If your IRA administrator doesn't offer, check writing and instead transfers the cash straight to the charity, Wilton recommends calling the charity beforehand and giving them a heads up so it will be finding a check from your IRA. Along with knowing who the donation is from, the charity will get your contact information to send you an acknowledgement for the tax records, and you can provide the charity special instructions about which fund or program you're supporting. (Keep at heart, that you may make the tax-free transfer from the IRA to a charity, but never to a donor-advised fund.)