With the 2019 just around the corner, end of year giving activities are wrapping up. Many of us make gifts of gratitude to places we hold dear and whose mission resonates with our values. Many of you have contacted St. Matthew’s House to inquire about making a gift from a 401(k), 403(b) or IRA. The rules are simple and we would be very grateful for your support.
Qualified Charitable Deductions
The requirements to make a qualified charitable deduction are:
- The account holder must be at least 70 ½ years of age.
- The limit for charitable gifts is $100,000.
- The gift must go directly to a qualified 501(c)(3) organization. St. Matthew’s House, Inc. is such an organization.
A qualified charitable deduction is not counted toward taxable income so it reduces the impact of some tax credits and deductions including Social Security and Medicare. Although you cannot take a charitable deduction on your taxes from a qualified charitable deduction, making a donation from your IRA may help you to both avoid income taxes on the donated portion of your distribution and may help you to avoid the highest income tax brackets.
An IRA and 401(k) Distribution Example
The following example might help you with your planning:
Mr. Smith is a long standing donor to St. Matthew’s House, having contributed $5,000 annually to support the mission of the organization. In addition to his generosity to St. Matthew’s House, he also contributes to his church and alma mater with gifts amounting to well over $10,000 a year.
In 2018, Mr. Smith will begin receiving distributions from some of his retirement accounts including his IRAs and 401(k). By making a qualified charitable distribution from his retirement accounts directly to his favorite charities, he will effectively avoid paying the 30% income tax rate that he would otherwise have to pay if he were to take his distributions directly and then make his gifts to his favorite charities.
Making these contributions from his retirement accounts also reduced his overall income and helped him avoid the highest tax bracket(s). On a $10,000 contribution, Mr. Smith saved approximately $3,000 in taxes using the qualified charitable deduction and it lowered his annual income.
If you have questions or you would like information on our 501(c)(3) status, or to transfer appreciated securities, please contact Sharon Sparrow, Director of Donor Advising, firstname.lastname@example.org 239-228-2055.
100% of Your Gift Goes to Life-Changing Programs
As a 501(c)(3), our 100% donation model allows all of our operating expenses to be covered by unique social enterprises – which enable us to direct 100% of all public donations toward our life-changing programs that continue to enrich countless lives in our community.
Tags: 401(k), 403(b), annuity, charitable contribution, End of year giving, IRA, retirement