Charitable Giving and National Non-Profit Day - A Great Duo
August 17th is recognized as National Non-Profit Day. Today, we recognize all the wonderful non-profit organizations that serve so many causes throughout our country.
According to NationalCalendarDay.com, somewhere a volunteer reads to school children. At the same time, a patient receives steady medication. A lawyer provides legal services for low-income individuals. A lost soul’s life is remembered with dignity, thanks to a nonprofit funeral home. Elsewhere, a first-time homebuyer moves into his own home. NND reminds us that each of these scenes is possible thanks to the nonprofit sector. It’s the result of the work performed by capable people and organizations.
Through nonprofits, awareness, research, and aid reach the people who need it most. Nonprofits also generate tremendous benefits to their surrounding communities and the broader world.
For example, following the recent U.S. recession in 2012, the nonprofit sector provided 5.4% of the nation’s entire GDP (gross domestic product), or $887.3 billion. Non-profits continuously employing nurses, web developers, lawyers, computer engineers, and more (sources: John Hopkins and Tactical Philanthropy Advisors reports).
Charitable giving has positive tax considerations as well.
Congress made the qualified charitable distribution (QCD) a permanent rule in 2015. It allows owners of a traditional IRA to exclude RMDs from their adjusted gross income (AGI) if they give the money to approved charities, also known as qualified charitable organizations.3
The QCD rule allows you to deduct the amount you donate from your IRA. The QCD counts as part of your annual RMD amount, and you must pay the distribution directly from your IRA to the qualified charity. Thus, if you are at least age 72, you can use the QCD rule to exempt your RMDs from taxation.
You can choose to make full or partial RMD distributions to charities. For example, if your RMD amount is $5,000 a year, you can make a $3,000 charitable distribution and take the remaining $2,000 yourself. You can also give the full $5,000 to charity if you choose to do so.
Required minimum distributions (RMDs) from individual retirement accounts (IRAs) can be a blessing. After all, you worked hard during your life to earn a regular form of income during your retirement. You can begin taking RMDs from your traditional IRA when you turn 72 years old. This is nonnegotiable and is a requirement of the account.
The distributions taken are then taxed at ordinary income tax rates. As such, they can also be a burden because they can boost your annual income—sometimes into a higher tax bracket. But there’s a way that you can put these distributions to good use, which can ultimately reduce your bottom line. Given the impact that RMDs can have on your tax bill, it’s worth creating long-term planning strategies around this rule.
Call us today to help you set up a Qualified Charitable Distribution!
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. Longleaf Wealth Management Group, LLC and LPL Financial are separate entities.