At age 70 ½, taxpayers are required to take required minimum distributions (RMD’s) from their IRA accounts: the government wants to collect their taxes from the earning retirees accumulated over the years. Failure to do so could generate penalties as high as 50%!

In 2015, Congress made a law permanent allowing RMD’s to be directed to charity, to satisfy the RMD requirements. What benefits are received from directing the IRA distributions to a charity such that income is never reported on the individual’s return, rather than withdrawing the money and taking the deduction against income?

First, if the taxpayer doesn’t itemize, there will be no tax advantage available for taking the RMD before contributing. Contributing to the charity directly and excluding the distribution from income is preferable or even necessary to receive the tax advantages for taxpayers otherwise wouldn’t itemize without the charitable contributions. For example, a married filing joint taxpayer who has $6,000 of property tax, state tax, and mortgage interest, and another $10,000 of charitable contributions, could get the full standard deduction of $12,600 and the contribution exclusion of $10,000, totaling $22,600; rather than just $16,000 tax benefit from itemizing.

Second, not taking distributions personally will keep adjusted gross income (AGI) low. Taxability and deductibility or many items on the tax return depend on keeping adjusted gross income as low as possible. Most importantly, social security is taxable based on adjusted gross income. Also, there is an NII and Medicare tax which can be triggered by higher income levels. Other items throughout the tax return could be affected as well by a fluctuating AGI, including medical deductions and tax preparation fees.

Be advised, there is no “double dipping” allowed, such as taking a charitable contribution and excluding the RMD from income. Also, the rules limit the deduction to $100,000 per taxpayer per taxable year. Additionally, Distributions are eligible for the exclusion only if made on or after the date the IRA owner attains age 70-½ and only to the extent the distribution would be includible in gross income (without regard to this provision).

The way this is carried out can be using a form (Fidelity has such a form), writing a check from the IRA if a taxpayer has IRA check-writing privileges, or just having the administrator cut the check directly to the charity. Either way, a taxpayer may get the emotional satisfaction of supporting a deserving charity accomplish its mission, while maximizing tax savings.