Required Minimum IRA Distributions


The IRS provides incentives for taxpayers to reduce their tax burden by inserting tax breaks into the tax code. Most of us are familiar with some of these incentives, like charitable deductions on donations to 501(c)3 nonprofits. Of course, the Land Conservancy of Adams County is a 501(c)3, so a donation to the Land Conservancy may come in handy at tax time. The IRS also allows landowners who preserve their property to deduct the value of a donated conservation easement; this deduction can be spread over several years to increase the tax advantages.

Another tax-deduction strategy recently made permanent in the IRS tax code specifically targets folks who are 70½ years old and have a traditional Individual Retirement Account (IRA). If you’re a retiree who’s at least 70½, the IRS requires you to take a required minimum distribution (RMD) from your IRA, or face stiff penalties. The bad news is that this RMD is taxed as ordinary income, and this added income could push you into a higher tax bracket, with obvious tax consequences.

But here’s the good news: You can avoid these tax implications by donating some, or all, of your RMD to a charitable organization in what is called a qualified charitable distribution (QCD). For tax purposes, this donation is subtracted from your required minimum distribution, reducing your taxable income and thus, your taxes. To qualify for this tax-reducing donation, a charitable organization must be a 501(c)3 non-profit.

There’s more good news: By allocating a percentage of your required minimum distribution to a charitable organization before taxes, you effectively have more funds available to contribute to a qualified nonprofit, if you choose.

All that said, please keep in mind that while the Land Conservancy has many qualifications, we are not tax advisors. If you think this tax situation applies to you, please consult a tax advisor and/or your IRA custodian.

Truth be told, these tax strategies apply to all qualified nonprofits, but if you enjoy all the beauty that breaks forth in Adams County in April, you may want to support a nonprofit that works to preserve open space and all the nature that abounds here!