ALPENA – Charitable giving through an individual retirement account (IRA) has become an increasingly popular way to make donations. The Community Foundation for Northeast Michigan has seen an increase in these types of donations over the past several years. According to CFNEM, new tax laws and a growing awareness of the benefits of giving through IRAs has attributed to the growth in this type of giving.
“We have seen a significant jump in the number of donations from IRAs, as well as in the total giving amounts from our donors’ generous gifts,” says CFNEM Executive Director, Patrick Heraghty. “One of the reasons it has become so popular is because it can be done tax free. During a time of increased demands on the services nonprofits provide, charitable giving can make a huge difference close to home. More people are realizing that giving this way can be impactful for the community and be beneficial to the donor.”
Heraghty notes that in 2020, required minimum distributions (RMD) were waived, but have been reinstated for the 2021 tax year. For those eligible, donating IRA funds to charity through a Qualified Charitable Distribution (QCD) may yield the biggest tax bang for your charitable dollar.
“The Community Foundation received the first donation from the retirement account of a donor in December of 2016,” says Heraghty. “Each year, we are seeing more and more donations coming to the Foundation’s funds through this mode of giving.”
There are a few simple requirements for an IRA distribution gift: The check must not pass through the donor’s hands; it must be written by the custodian of the IRA directly to the charity, which must be a qualifying charity other than a donor advised fund or a private foundation; and you will need an acknowledgement from the charity for the gift.
While a donation from an IRA can be made at any time to a charitable organization, the Community Foundation staff points out that Giving Tuesday, on November 30, 2021, may be the perfect time for giving such a gift.
“Our local Giving Tuesday Northeast Michigan event is coming up quickly,” says CFNEM’s Marketing Communications Director Christine Hitch. “We have 60 nonprofit organizations throughout our nine-county service area participating in our event this year, and we want to make sure people know they can use a distribution from a retirement account to be counted toward Giving Tuesday in support of any of these organizations.”
Hitch says that for an IRA distribution donation to be counted for Giving Tuesday Northeast Michigan, it needs to be received by the Community Foundation between November 23 and November 30. She also points out that while Giving Tuesday is a big day of giving, IRA gifts can be made at any time to any of the Community Foundation’s 500+ charitable funds, or to any qualifying charitable organization near to their heart.
Those looking to make charitable donations through an IRA distribution should contact their tax professional, as the benefits could be substantial.