IRA Distributions

Some of us have used Individual Retirement Accounts (IRA) as a means of saving for the future.  The U. S. Government has determined that in the year in which we reach seventy and one-half (70 ½) years of age, we must start taking a required minimum distribution (RMD) from our IRA’s.  If we are older, we may already be receiving some portion of our IRA each year. 

When we take possession of these withdrawn funds, they are considered taxable income.  If any of these funds are in excess to our current needs, we might consider donating the excess to some good cause, such as the support of Lake Gibson UMC.  How we do this might have an impact upon our personal tax liability?

If we consistently itemize our Federal taxes, we can always deduct our charitable deductions.  Alternatively, if we use the standard deduction, accepting an RMA directly would increase our income as we can’t claim the gift (we’ve already accepted the standard deduction).

For the FY 2019 tax year (filed in 2020), standard deductions are:

            Head of household                                                =          $18,350

            Single & married filing separate returns          =          $12,200

            Married couples filing jointly                              =          $24,400

Over 65 additional deductions are.

            Head of household                                                 =          $1,600

            Single & married filing separate returns          =          $1,600

            Married couples filing jointly (per person over 65) = $1,300

One way to continue to take advantage of the standard deduction and avoid taxes on your IRA distribution is to have a your excess sent directly to a charity.  Whether you donate all or a portion of your RMD, the portion donated is not taxed. 

The important point for those who don’t itemize is that you do not take possession of the RMD (or the portion you want to donate).  If the money passes through your hands, you must pay taxes on it.  If it goes from the financial institution directly to the church, it is not taxed.

If you want to use this tool to donate tax free funds to your church’s mission, notify the firm holding your IRA to send any amount you specify to “Lake Gibson United Methodist Church, 424 W. Daughtery Road, Lakeland, FL 33809”.  It goes out tax free from you to the support of God’s work here on earth.