Whitefield Academy Blog

Making Your IRA Work for You

by | Dec 5, 2019 | Affordability, Education, Uncategorized | 0 comments

Whitefield is blessed to have a strong community of families. These families are often multi-generational in their support of our school. Parents, grandparents, aunts, uncles, and all other loved ones; we are so appreciative of your support in making our school the best it can be.

For those over 70 ½, there is a fantastic tax-advantaged way to donate to Whitefield. This is the most optimal way of donating to charity for over 95% of Americans who qualify, so hopefully our brief explanation will benefit you in all your forms of charitable giving. This form of charitable giving allows you to give more of your hard-earned assets to charity instead of them being taxed by the United States government. It’s really quite simple and here are the key attributes:

Those over 70 ½ who have an Individual Retirement Account (IRA) are required by the government to take Required Minimum Distributions (RMDs) from your IRA every year. You did not pay taxes on that money as you contributed to your IRA through the years, so now the US government wants to collect their deferred taxes. All RMDs are taxed at ordinary income tax rates which, for the average American, is approximately 25%.

For those required to take an RMD from their IRA, if you make any or all of that required distribution payable to Whitefield Academy or any qualified charity (instead of having it made out to you personally), there are zero tax consequences. The check is still physically distributed to you but the name on the check would say Whitefield Academy. For example, let’s say you have $10,000 in RMDs that the government requires you to take. If you have $6,000 made payable to Whitefield and $4,000 payable to yourself, you only pay taxes on the $4,000. Inversely, if you take the entire RMD distribution of $10,000 in your name, you pay taxes on the entire $10,000. If you were to then donate $6,000 by personal check to Whitefield, you would have already paid taxes on that $6,000 (assuming you, like most Americans, take the standard deduction). Thus, having funds transferred directly from your IRA to a charitable organization reduces your taxes and allows a larger percentage of your assets to be donated rather than used to pay taxes.

Your financial adviser or tax professional can easily walk you through how to complete this quick process which only requires one signature on one form. If you would like a member of the Whitefield Finance Committee to help you walk through this process, we would be glad to help at any time. You can contact the committee through the main office at Whitefield Academy.

Please note that this charitable gifting has to occur by December 31st, not the traditional April 15th tax filing deadline. Also, recent tax reform doubled the standard tax deduction for families, so itemized deductions no longer make sense for approximately 95% of Americans, making this one of the few remaining tax efficient ways to give to charity.

Charitable giving should be done regardless of tax-efficiency, but we wanted to make you aware of this fantastic tax-advantaged way to give back to our community here at Whitefield Academy. Please reach out to us if you have any further questions or would like to discuss in more detail.

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