Donating to The Mountain Through Your IRA

Annuit Coeptis–Affirming undertakings and beginnings.

As many of you may be aware starting in the 2018 Tax Year (this year!), giving to charities and 501(c)3 organizations (like The Mountain) may not provide a tax deduction as before. To reduce taxable income in the past, about 30% of households used the Itemized Deductions and the amount donated to charities and nonprofit organizations reduced taxable income. The Standard Deduction was raised beginning this year–basically doubled–and fewer (an estimated 90%) will use the Standard Deduction instead of itemizing. The Standard Deduction is $12,000 for Single and $24,000 for Married filing Jointly. This means you’ll need to exceed these numbers in order to Itemize. If you don’t itemize, you wouldn’t normally use your charitable giving to reduce your taxes.

BUT (big But for a reason!) there is a workaround. If you are over 70 1/2 and taking the Required Minimum Distribution (RMD)–the amount you must take from your Individual Retirement Accounts (IRA) each year– you can get a nice tax cut by donating through your IRA. The amount you give from your RMD is not counted as income and therefore not taxable. For example, instead of sending your charitable donation to The Mountain directly from your personal accounts, you can ask your IRA manager to the gift amount from your IRA, using a “Distribution Request From IRA” form. You complete and sign the form and your IRA manager will send you a check made out to that organization for you to send to The Mountain. Some managers will send it directly, but I suggest you have them send it to you to submit.

When tax time comes, the IRA will send you a statement showing withdrawals and tax paid. Some IRA companies will show the amount given to a charity and deduct it from the total. Others will just show the total withdrawal and you will need to deduct the amount gifted from the IRA total using the IRS tax form. Either way, your taxable income from your IRA is reduced by the amount you donated from your IRA.

As always, it is best to check with your financial advisor or IRA manager for advice regarding your particular situation.

By Dennis Lauer, Mountain Supporter