As we start thinking about tax season, many of our readers own Individual Retirement Accounts (IRAs) and are very familiar with the mandatory distribution rules that are required after the tender age of 70 ½ . Or 72. Or 73 as it stands today. But are you familiar with how to take those distributions free from income tax?
Required Minimum Distributions (RMD) is a mandatory distribution of retirement dollars that have not yet been taxed, along with the gains they earned after years (or decades) of tax deferral for certain IRA holders. This IRS rule triggers taxation to the IRA holder but can be avoided if given directly to a qualified charity via a Qualified Charitable Distribution (QCD).
It's not just traditional IRAs that qualify for QCD's, but also Beneficiary Traditional IRA's and inactive SEP & SIMPLE IRA retirement accounts. In Short: If you are taking RMD's, you can direct those distributions be given directly to SASD thus avoiding taxation while meeting your RMD requirements. A neat trick for anyone that isn't dependent on their RMD income.
Before making tax decisions, please consult with your tax advisor to ensure these general guidelines apply to your specific situation. This strategy is best done with the assistance of a tax professional to confirm that you, and your favorite charity, both qualify.
Kimberly Enders CFP® CPFA
CERTIFIED FINANCIAL PLANNER®
Enders Wealth Management
37800 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
www.enderswm.com
#kimenderscfp
Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.
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