Still need to take your required minimum distribution (RMD) from your IRA? Using these funds to make a charitable gift may be a tax-smart choice. Starting at age 70 ½, you can direct a qualified distribution to a public charity like Carnegie Mellon University to satisfy your RMD, and this transfer will not increase your taxable income.

Why is it tax-smart?

• By minimizing your total taxable income, you may pay less income tax than if you took a distribution and then applied the charitable deduction. 
• Not an itemizer? No problem. Making a qualified charitable distribution eliminates the need for taking a charitable deduction, so you don’t have to itemize on your tax return to recognize a tax savings.

EXAMPLE

Suppose Jack has $500,000 in an IRA and would like to contribute $25,000 to charity this year. Jack can authorize the custodian of his IRA to make a qualified charitable distribution of $25,000 to fulfill his charitable intentions. He will satisfy some or all of his RMD and will not pay any income tax on the $25,000 charitable distribution. Jack cannot deduct this gift—but he has already received a potentially greater benefit by avoiding $25,000 in taxable income.

HERE’S WHAT YOU NEED TO KNOW:

• The distribution must be made directly from the IRA administrator to Carnegie Mellon University. It cannot be directed to a private foundation, supporting organization or donor advised fund.
• The total of all IRA distributions to charity cannot exceed $100,000 per person per year.
• The gift cannot be used to establish a gift annuity or fund a charitable remainder trust.
• You can still make a qualified charitable distribution if you’ve already taken your RMD.
• The end of the year is a very busy time for your IRA custodian, so don’t wait until the last minute to make sure that you can take advantage of this opportunity to be “tax-smart”!