Congratulations! You have worked hard, saved wisely and have placed a substantial amount of money into your traditional IRA. Plus, you have a sufficient income from other sources, allowing you to comfortably retire. You have also taken care of your health and attained the age of 70 ½. With your other sources of income, you do not need to withdraw anything from your IRA. However, IRS regulations require that you withdraw a percentage of your IRA account, a required minimum distribution, every year. This is added to your adjusted gross income for the year and could produce additional income tax liability even if you elect to donate the IRA distribution you receive to support the great work of Scalpel at the Cross – ouch!
There is a way to avoid the additional income tax liability, while stewarding the IRA resources wisely to help God’s children in need in the Peruvian Amazon. By using a technique called a charitable IRA rollover (technically an “IRA Qualified Charitable Distribution”), you can instruct your IRA custodian to direct up to $100,000 per year of your required distribution to a qualified 501 (c) (3) organization like Scalpel. If done properly, the charitable distribution will not get included in your Adjusted Gross Income for the year. A few caveats:
- Always consult your own tax professional to make certain this smart giving technique is suitable for you.
- Make the distribution early in the year, as taking regular distributions will reduce the amount available for charitable use.
- Remember that you can donate a portion, or all of your RMD to Scalpel.
- Ask your IRA custodian how to make the distribution properly. Some allow direct check writing by you, while others require a form instructing them to do so.
- If you have a 401 (k), funds can be rolled over from that retirement vehicle into a traditional IRA, from which a QCD can then be made.
- Make certain the charitable recipient is a qualified organization like Scalpel at the Cross, that it actually receives your gift, and that you receive a gift acknowledgement from it.
One more thing you may consider is the simple act of making Scalpel at the Cross the beneficiary of your IRA. By doing this, your legacy will include supporting the ongoing work of our ministry even after you pass on, and ensure that no income taxes will ever be taken out of the residual of your IRA account. Again, consult your IRA custodian institution for the appropriate forms.
For more information on this and other smart giving ideas, please email us.
