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Do Well By Doing Good - The RMD Strategy

Updated: Feb 21, 2023

We often advise our clients who are charity-minded, to use their Required Minimum Distribution (RMD) to advantage. You probably know that at a certain age you are required to take a taxable distribution from your IRA and from other “qualified” accounts. That age was recently raised from 70½ to age 72. And more recently changed to age 73 and for some people, age 74 (for those not already required based on previous tax code). If you make some or all of that distribution directly to your favorite charity, the amount passing to the charity is not included in your taxable income.

The donation might otherwise be tax deductible but only to the extent that it and other itemized deductions exceed your standard deduction. Check with your tax preparer or financial advisor.

This strategy is not limited to the Required Distribution. Any funds transferred from your IRA, directly to a qualified charity pass income tax free, up to $100,000. It’s important that the charity gets its funds before you take any amount for yourself. This is a fairly simple process. There are not many caveats. But do seek advice.

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