IRAs

How to Ensure Your IRA Donation to Charity Is Tax-Free

Donating IRA money directly to a charity can satisfy your required minimum distribution and lower taxes, but IRA administrators vary on how to deliver your gift.

Question: I want to give my required minimum distribution from my IRA to several charities. What steps do I need to take so that I’m not taxed on the RMD? Is there a minimum amount I can transfer or a limit to the number of charities I can send the money to?

Answer:

People older than 70½ can transfer up to $100,000 per year from their traditional IRAs to charity, which can count as their required minimum distribution but is not taxable if they follow the rules for a qualified charitable distribution (QCD). (This doesn’t apply to a Roth IRA, which has tax-free withdrawals and no required distributions.) The gift stays out of your adjusted gross income only if you make a direct transfer from your IRA to the charity. It doesn’t count as a tax-free transfer if you withdraw the money first and then make a donation to the charity. Ask your IRA administrator what steps you need to take, because the procedures can vary from firm to firm.

Fidelity, for example, gives you several options. If you have check-writing privileges on your IRA, you can write a check directly from the IRA to the charity. Or use Fidelity’s QCD form to have money sent directly from your account. Fidelity recommends submitting the form no later than November 30 to allow enough time for processing.

If Fidelity sends the money, the check will be written out to the charity and include your name. Let the charity know to expect the donation, and provide your address so that it can send you an acknowledgement for your tax records. Another option is to have Fidelity make the check out to the charity and send it to your home address so that you can forward the donation to the charity yourself.

Vanguard requires that you either fill out a form or call to request the transfer for the donation to count as a QCD. (See Vanguard’s Required Minimum Distribution Service for more information.) Vanguard makes the check out to the charity and sends it to you to forward. Make the request with plenty of time to receive the check and get it in the hands of the charity.

Neither firm has a minimum amount you can transfer to each charity, and neither limits the number of charities you can support each year. You can’t, however, transfer more than $100,000 tax-free from your IRAs in any one year.

For more information about the benefits of making a qualified charitable distribution, see The Advantages of a Tax-Free Transfer From an IRA to Charity.

Most Popular

The 25 Cheapest U.S. Cities to Live In
places to live

The 25 Cheapest U.S. Cities to Live In

Take a look at our list of American cities with the lowest costs of living. Is one of the cheapest cities in the U.S. right for you?
August 7, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
August 12, 2022

Recommended

How to Steer Your Retirement Portfolio Through the Storm
retirement planning

How to Steer Your Retirement Portfolio Through the Storm

Right now, it feels like there’s an economic challenge around every corner. But the good news is you can still protect your nest egg.
August 12, 2022
Beware the Caller From “The Government”: It’s a Scam
Scams

Beware the Caller From “The Government”: It’s a Scam

Scammers' persistence is matched only by their insolence: They even try to impersonate the very agencies trying to stop their grift.
August 11, 2022
Annuities Rising in Popularity
annuities

Annuities Rising in Popularity

As interest rates increase, so does the appeal of annuities. How much do you know about these insurance products?
August 9, 2022
IRAs vs. 401(k)s: Exceptions to 10% Penalty for Withdrawals Under Age 59½ Differ
IRAs

IRAs vs. 401(k)s: Exceptions to 10% Penalty for Withdrawals Under Age 59½ Differ

Before pulling money out of retirement accounts early, check the rules. The exceptions to penalties can differ depending on which type of account you’…
August 2, 2022