The Mountaineers
Carol Sue skips most of Kiplinger’s magazine; she’s not interested in their tips on investments and is well past needing advice to save for a house or put kids through college. But several years ago, an article about saving money on taxes in retirement caught her eye.
People aged 70½ or older can make gifts directly from a retirement account (such as an IRA) to a qualifying charity (such as The Mountaineers). This popular gift option is commonly called the IRA charitable rollover, but you sometimes see it referred to as a qualified charitable distribution, or QCD for short. By making a donation directly from a retirement account, the gift amount counts towards a required minimum distribution (RMD), but is still considered tax-free. This means that unlike any other distribution during or after your lifetime, the donation doesn’t incur any income tax!
When Carol Sue read about this, she did the math and came up with a plan. “The minute I turned 72 and had to [take a minimum distribution], I thought ‘Oooooh, I can take some out and I don’t have to pay tax on it!’” As someone who supports The Mountaineers anyway, she was excited to find a new way to do so that was mutually beneficial. “The fact that you can do it is so great.”
If you have an IRA and are older than 70½ , making your annual donations through a QCD might be a good option for you, whether you want to donate $25 or $100,000!
Carol Sue had to be diligent the first few times - hunting down the form from her financial services website and printing, completing, signing, and scanning it back. A self-proclaimed “unreformed perfectionist”, she had what it took to see her gift through the process. But since QCDs have become such a popular donation option in the last several years, most financial services companies have now made it much easier. Now she just navigates to a page on her fund website and fills out their form online. If you’ve applied for backcountry permits over the last few years, this kind of digital transformation may sound familiar!
Why Consider an IRA Rollover Gift?
- Your gift will be put to use today, allowing you to see the difference your donation is making.
- Beginning in the year you turn 72, you can use your gift to satisfy all or part of your required minimum distribution (RMD).
- You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.
- Since the gift doesn’t count as income, it can reduce your annual income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.
One of the reasons Carol Sue donates now is because she appreciates how we're utilizing philanthropy to invest in leadership skills for volunteers. When she was volunteering regularly it was always important to her to coach people as responsible leaders. She is impressed with how she's seen The Mountaineers intentionally invest in leadership skills like group management and communication in recent years. "That is why the organization has gotten so robust … They started to pay attention to the training that needed to happen instead of just relying on it to be modeled." Volunteer Leadership Development at The Mountaineers is funded 100% by philanthropic support.
By making a gift this year from your IRA, you can see your philanthropic dollars at work. You are jump-starting the legacy you would like to leave and giving yourself the joy of watching your philanthropy take shape. Moreover, you can fulfill any outstanding pledge you may have made by transferring that amount from your IRA as long as it is $100,000 or less for the year.
The Mountaineers encourages you to consult with your financial advisor(s) about what is best for your financial health and philanthropic goals. If you would like to explore other ways to donate assets or plan a legacy gift, check out the resources we’ve compiled at mountaineers.planmylegacy.org.
Bonus Tips from Carol Sue
- Get your QCD done early in the year to "get it out of your hair."
Not only is this good hair-care advice, but it will help prevent you from adding to your taxable income by making your donation before withdrawing for yourself. Also, you don’t want to put it off to the last minute and risk having the funds not leave your account by December 31st! - Do a search for “charitable” to quickly find the right form at your brokerage or financial services website.
“I used to search ‘deduction,’” Carol Sue laughs. “On a financial website! Can you imagine how many things it returned?!” If you can’t find it right away, email them to ask about their process for “Qualified Charitable Distribution”. - Look for a checkbox or form option to help you set up more than one donation at a time.
Carol Sue supports several worthy organizations and her financial services company has put in some features so that she doesn’t need to enter all of her own information each time. Some even have an option to make your donation recur annually!
As a 501(c)(3) organization, gifts made to The Mountaineers® are 100% tax-deductible. The Mountaineers, Tax ID 27-3009280, is located at 7700 Sand Point Way NE, Seattle, WA 98115.
The Mountaineers and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
