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Tax tip for 70-year-olds

posted Apr 5, 2017, 8:37 AM by Tim Isbell
A couple of years ago I posted about Tax-Smart Donations. It included the wisdom of using some or all of your Retired Minimum Distributions (RMD) for charitable contributions. For readers unfamiliar with this part of growing older, in the year Americans reach the age of 70.5 we must begin withdrawing money from Traditional IRAs. The IRS sizes the mandatory withdrawal based on the balance in our account on the previous December 31. Since this money was not taxed when went into the account nor as it grew through the years, every dollar we withdraw in retirement is taxed at the ordinary income rate. 

For those of us seniors who know we're going to give money to charity this year, there is a tax advantage to giving it directly from our RMD because these dollars do not add to our taxable income - and therefore, are not taxed. Because it is not a deduction, but a reduction in income, the benefit applies as much to those filing the short form as those filing the long form! For the details on this, check out Tax Smart Donations. The very last section deals with donating from an RMD.

So, why am I writing about it again? Because the first time I wrote about giving from an RMD, I was too young to make use of it. I'm old enough now to use it - so I am. And I revised the web page to reflect what I learned.