An individual retirement account (IRA) is a wonderful way to save for retirement each month so that you’re able to take care of yourself and your family in the future. But did you know that IRA gifts are also a tax-wise way to put those funds to use for charities you love?
Here are four things, courtesy of Wycliffe Foundation, that you probably didn’t know about giving from your retirement account:
1. Your Required Minimum Distribution Can Benefit Missions.
Those who are 70 ½ years old are required to make a distribution from their IRA every year. But that required minimum distribution (RMD) doesn’t have to raise your taxable income. If you have other sources that provide adequate income to meet your needs, you can gift your RMD to a ministry and support work like Bible translation.
2. The Math Is in Your Favor.
If your RMD for the year is $25,000 and you receive that money from your IRA, it’ll appear on your taxes as ordinary income. But, if you instruct your IRA custodian to transfer that money directly to one or more charities (known as a qualified charitable distribution), it’ll keep the RMD from appearing as taxable income and save an estimated $6,250 in federal and state income taxes. It’s the most tax-wise way to make a charitable gift of cash, even if you don’t itemize your tax deductions. And it allows you to make a significant gift without affecting your cash flow.
3. All Retirement Accounts Are Welcome.
If you own other qualified retirement plans such as a 401(k), 403(b) or SEP-IRA (Simplified Employee Pension Plan IRA) you can give to charity from them as well! The first step is to roll the assets into an IRA. The process is easy and we can help provide more information on next steps.
4. Wycliffe Makes a Great Beneficiary.
Retirement accounts aren’t always the best asset to leave to people other than your spouse because they can result in estate taxes. However, IRAs are a wonderful asset to give to charities like Wycliffe because charities are tax‑exempt.