Exploring Uses for your Required Minimum Distribution Part II: The Qualified Charitable Distribution

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By Maurice Stouse, Branch Manager and Financial Advisor

As we approach the end of the year many of you will be needing to take your Required Minimum Distribution (RMD) from your retirement accounts. That must be done by Thursday, December 31st, 2019. You work with your plan provider or financial institution where your retirement plan or IRA is held and complete a distribution because it is required by the IRS. You can do so by completing a form or provide instructions to your financial institution.

The RMD typically 1) begins at age 70 ½ (or April 1st in the year following the year you turn 70 ½) and 2) takes into account the plan balance from December 31st of the previous year and 3) utilizes the IRS tables for mortality – how long you are expected to live. The number or factor for mortality usually is the divisor into the balance which then determines the amount that must come out. That amount – with some exceptions is taxable income.
This article further explores utilizing some of your assets in your retirement plan to address your charitable contributions and potential income tax savings. If you are charitably inclined your RMD might possibly be used to make a charitable contribution, and then satisfy your RMD.

Here is how it works: You have the option of moving up to $100,000 per calendar year from your retirement account to a charity of your choice. That charity must be qualified as a 501 (c) 3 charity and the contribution must be sent directly to it. By utilizing this, the distribution is not taxable to you, and it also lowers the retirement account balance hence making future payments smaller and the tax owed potentially less on future distributions. The distribution in this form as a QCD is excluded from your taxable income and might also reduce taxation of social security benefits and lower Medicare Part B and D premiums.
To determine if this is a strategy that might work, please see your tax advisor and financial advisor to learn more.

Maurice Stouse is a Financial Advisor and the branch manager of the First Florida Wealth Group and Raymond James and he resides in Grayton Beach. He has been in financial services for over 32 years. His main office is located at First Florida Bank, 2000 98 Palms Blvd, Destin, FL 32451. Branch offices are in Niceville, Mary Esther, Miramar Beach, Freeport and Panama City. Phone 850.654.8124. Raymond James advisors do not offer tax advice. Please see your tax professionals. Email: Maurice.stouse@raymondjames.com.