Stewardship & Traditional IRA Charitable-Giving Tax Benefits
The “Later-in-Life, End-of-Life” evening seminar held earlier this year elicited a lot of feedback regarding Catholic Health Care Directives, funeral planning, and financial matters. It informed and reminded attendees that it is never too early to prepare for those stages in life–that can get here before we know it. An astute parishioner reminded me of the potential significant tax benefits that IRA’s may provide when a reaching a specific age (i.e., 72) and required minimum distributions (RMDs) come into play. By giving charitably with your traditional IRA read below to learn some specifics from parishioner Craig Francois’ letter on how that works. Then, work with your tax advisor and/or financial planner–if it makes good business and charitable sense–to put your plan into action. Let us know if you need more information or a packet of materials on all topics discussed during that seminar. Contact Deacon Gordon @ firstname.lastname@example.org or (651) 313-8493.
Tax Benefits by Giving with your Traditional IRA
It seems that I have always experienced receiving more than I have given, especially when giving with a stewardship heart.
For instance: When I help out at a Knights of Columbus event, I make a new friend. When I’ve helped a neighbor with a quick project, I will find my driveway cleared of snow when were gone for the weekend.
Luke 6:30 says “Give and it will be given to You”
The same is true for charity giving. It seems the more we give, the easier it is for our finances to work out. Sure, occasionally there is an unexpected raise or windfall, but if we look harder there are other wins. I hear that the furnaces, hot water heaters and appliances just don’t last, but ours are going strong after 25 years…. hummm? Blessings are all around us when we look for them.
For those of you over 70 1/2 years old (or with a parent over 70 1/2) did you know that with you IRA you can give more to charity without paying more?
Deacon Gordon recently held a “later in life” discussion at St Joseph’s Church in Rosemount. We were asked who had an IRA and 51 of 53 people raised their hands. When asked who gives through their IRA directly to their charity of choice, only 2 people raised their hand.
We learned that by directing your IRA account to pay the charity, you don’t have to pay income taxes on that amount. For example:
– If you give $2000 to your Church each year and pay out of pocket you need to take $2,376 out of your IRA (assuming a 12% Federal and a 6.8% Mn State income tax rate) with $376 going to the IRS.
– By having your IRA making the distribution directly to the Church you can save the $376…better yet give the Church another 10%.
– You do lose the tax deduction if you itemize, but most people use the standard deduction
At age 72 you are required to take out of your IRA a RMD (required minimum distribution) whether you need the income or not. This may put you in a higher tax bracket. By working with your tax advisor and giving directly to a charity, you will reduce your RMD income tax.
Now that is a winning stewardship giving strategy!