Not everyone wants to take required minimum distributions from their retirement accounts right away. If you do not want to take your distribution, one option is to donate it to charity and get a tax deduction.
You are required to begin taking distributions from your tax-deferred IRA when you reach age 72 (70 ½ if you turned 70 ½ in 2019 or before) even if you do not need the money. The distributions are included in your taxable income for the year and taxed at the your standard tax rate. In fact, the additional income from a distribution may push you into a higher tax bracket, especially if you are still working.
If you do not want a distribution, you may want to consider donating the distribution directly to charity through a qualified charitable donation. By donating your required minimum distribution, the distribution will not be included in your gross income, which means lower taxes overall.
A qualified charitable donation can also be a good way to get a tax deduction after the 2017 tax law doubled the standard deduction, making it harder to get a deduction for a direct charitable contribution. If your charitable contributions along with any other itemized deductions are less than $12,950 a year (in 2022), the standard deduction will lower your tax bill more than itemizing your deductions, which can be a disincentive to donate to charity. A qualified charitable donation is a way to make a donation and receive a tax benefit from it.
In order for the donation to count as a required minimum distribution, the donation must be made directly from the IRA to the charity. The funds cannot be distributed directly to you then subsequently donated to charity. The charity must be approved by the IRS, and different IRAs have different rules about how to make the distributions. If you make a qualified charitable donation, you cannot also itemize the deduction. The maximum amount you can donate is $100,000. If you donate less than your required minimum distribution, you will need to take the remainder as a distribution.
For more information from the IRS about distributions, click here.
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