Using Your RMD to Make Charitable Contributions

As you approach retirement age, you will be required to start taking distributions from your tax-deferred retirement accounts, such as traditional IRAs, 401(k)s, and 403(b)s. These distributions are called Required Minimum Distributions (RMDs), and they are calculated based on your age and the balance of your retirement account. Failure to take your RMD can result in hefty penalties, so it’s essential to understand the rules and make the most of your RMDs.

One way to make the most of your RMD is by using it to make charitable contributions. Donating to charity is a noble and fulfilling act, and it can also offer some tax benefits. By donating your RMD to charity, you can reduce your taxable income and support a cause you care about. Here are some tips for using your RMD to make charitable contributions.


  1. Choose a qualified charitable organization. First, make sure you donate to a qualified charitable organization to get the tax benefits. Not all charities are eligible to receive tax-deductible contributions, so check with the IRS to ensure the charity you’re interested in is eligible. Generally, religious organizations, charitable trusts, and nonprofit organizations are qualified charitable organizations.
  2. Consider a Qualified Charitable Distribution (QCD). A QCD allows you to donate up to $100,000 of your RMD directly to a qualified charity. This amount can count toward your RMD for the year and is excluded from your taxable income. This means that you won’t have to pay income taxes on the amount you donate to charity, reducing your tax liability.
  3. Take advantage of the standard deduction. The Tax Cuts and Jobs Act of 2017 increased the standard deduction, making it more challenging for taxpayers to itemize their deductions. However, if you donate your RMD to charity, you can take advantage of the standard deduction and reduce your taxable income. By donating your RMD to charity, you can still get a tax benefit even if you don’t itemize your deductions.
  4. Don’t forget about donor-advised funds. A donor-advised fund (DAF) is a charitable giving account that allows you to make charitable contributions and receive an immediate tax deduction. The money you donate to a DAF can grow tax-free, and you can recommend grants to qualified charities over time. By donating your RMD to a DAF, you can support multiple charities and make a lasting impact.


In conclusion, donating your RMD to charity can be a great way to reduce your tax liability and support a cause you care about. Before making any charitable contributions, consult with your financial advisor and tax professional to ensure you’re making the most of your RMD and getting the tax benefits you deserve.





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