Consider Your IRA for Tax-Free Charitable Donations

Your IRA can be more than a tax efficient retirement plan. It can be a way to include Wake Forest Baptist Health or the Wake Forest School of Medicine in your charitable giving plans while providing you with tax advantages.

The IRA, like most retirement plans, is subject to income tax—and possibly estate tax—upon distribution. This tax is a result of the deferral you received during the accumulation phase of your IRA assets. There is, however, an exception to having to pay income tax on distributions.

Exception to RMD Income Taxes

IRA owners age 70½ or older can use Required Minimum Distributions (RMD) to make tax-advantaged donations up to $100,000 annually to a qualified charity—such as Wake Forest Baptist Health or the Wake Forest School of Medicine. The contribution will count toward your RMD.

Simply direct your plan administrator to make the gift from your IRA to the charity. This way, the RMD is excluded from your gross income that otherwise would be subject to taxes, and the charity benefits immediately from your gift. Keep in mind that you will not be able to "double dip" and take a charitable deduction on the IRA gift.

If you elect to use the higher standard deduction of $24,400 for married filing jointly ($12,200 for individuals), the gift made directly to the charity from your IRA works nicely. By keeping your taxable income lower through an IRA gift, an added benefit is that it may work in your favor by helping to reduce the likelihood of being impacted with an added 2.3% Medicare surtax or a 9% Social Security tax.