Smart Tax Strategy That Helps a Local Charity—A Win/Win for You and for Oracle Schools Foundation

Dale Farland

It is July, and do you still need to take a Required Minimum Distribution (RMD) from your Individual Retirement Account (IRA) in 2024? Would you prefer not to pay income taxes on your RMD? There is a Smart Tax Strategy that reduces your income taxes while helping a local charity: the Oracle Schools Foundation (OSF). Of course, you should always consult with your tax advisor.

When you receive your RMD or any distribution from your IRA account, you pay income taxes on it. However, if you make a Qualified Charitable Distribution (QCD) directly from your IRA to the charity, you do not pay any income taxes on that distribution. Of course, you cannot claim the donation on your income taxes; however, you are also not paying any income taxes on that distribution. So, it is a win/win. You pay less income taxes, and the charity receives the donation.

A Qualified Charitable Distribution (QCD) is a distribution from your IRA to a qualified charity. You must be age 70-1/2 or older to make a Qualified Charitable Distribution. A QCD is not taxed. If you are 73 or older, QCDs also can count toward your annual RMD from your IRA.

OSF is a 501(c)(3) organization and a QCD for this type of distribution from your IRA. Do not be confused with Arizona Qualified Charitable Organizations. This is a federal tax benefit.

OSF is the fundraising arm for the Oracle Schools. Donations primarily fund the free KinderPrep (preschool) for three- and four-year-old children of the Oracle vicinity. Did you know that over 65% of the students in the school system receive free or reduced breakfast and lunches? Donations help fund KinderPrep but also other vital programs for students at Mountain Vista School (see Oracleschoolsfoundation.com).

To make a QCD to the Oracle Schools Foundation, have your IRA trustee send a check directly to Oracle Schools Foundation, P.O. Box 8863, Catalina, AZ 85738. In compliance with IRS guidelines, no goods or services are provided in exchange for the donation. It will not be placed in a donor advised fund nor given to a supporting organization.

Key Takeaways:

Donation must go to a qualified charity.

• Donation must come directly from the individual retirement account (IRA) through your trustee to the charity. You cannot withdraw the funds and make the donation directly.

• Maximum annual QCD limit is $100,000.

• QCD cannot be claimed as an itemized charitable deduction on your taxes.

• IRA owners must be age 70-1/2 or older to make a tax-free charitable contribution.

• Those who are 73+ years old can transfer up to $100,000 per year directly from an IRA to an eligible charity as their RMD without paying income tax on the transaction. The amount of the QCD cannot be more than the amount of the distribution that would count as income.

As aforementioned, always consult with your tax advisor. Thank you!