Does a Charitable Contribution From an IRA Count Toward RMD?

Required Minimum Distributions

IRAs allow people to save for retirement by making tax-deductible deposits into these accounts. Withdrawals are not allowed without a penalty until the account owner is at least 59 1/2 years of age. When the account holder reaches age 70 1/2, the IRS requires him to begin making a minimum annual withdrawal, known as a required minimum distribution (RMD). The IRA owner is subject to pay tax penalties if the RMD is not made. The specific amount of the RMD is determined by the amount of money in the IRA and the person's age.

Usually all withdrawals from the IRA, including the RMD, are counted as ordinary taxable income. IRA owners who are required to make RMDs are allowed by the act to distribute the withdrawn money to charities as donations. These amounts will count toward their RMD, but are not counted as taxable income as in regular withdrawals. This charitable contribution, called a qualified charitable distribution, is limited to $100,000 and must be made to an IRS-qualified charitable organization.

IRAs are directly controlled by a qualified trustee such as a bank, rather than the account owner. The account owner must give detailed instructions to the trustee to make the charitable distribution. No IRS form or other form is required. The payment to the charity has to come directly from the IRA trustee. If the owner makes the donation directly, the tax-free benefit will be lost. However, the owner is allowed to take the check from the trustee payable to the charity and personally deliver it to the charity.

The IRA owner can designate any charity of his choice, provided it is a qualified charity according to IRS rules. The donation must be considered 100 percent tax-deductible per IRS regulations. If the IRA owner contributing the money receives any kind of recognized financial benefit from the charity, the IRA tax-free provision for the donation will be lost. The amount of the contribution counted as a tax-free IRA withdrawal cannot also be used as an itemized tax deduction.