Did you know there are several easy ways to pay less income tax by donating to Walkin N Circles Ranch?

This article will walk you through some of the available donation methods to our organization with a special breakdown on how to use a Qualified Charitable Distribution (QCD) to help care for horses in need (while also potentially lowering your taxable income and taxes owed). 

Initially, the first thing that comes to mind when donating, and probably the easiest way to donate, is to make a direct cash donation or check contribution, available in both physical and digital formats (including PayPal). A potentially lesser-known way of helping our rescue horses can include your donations of new or gently used items to the Walkin N Circles Ranch Thrift Store – by doing so, you can see a purchase you didn’t use that much put to great use.  Furthermore, land or property donations via a deed or will can also help support us. And of course, your time volunteering, whether in the shop or with the horses themselves, is the greatest donation of all.

If you are looking for additional options, and you are currently over the age of 70½, then your strongest asset may be a Qualified Charitable Distribution (QCD), especially when coupled with your Required Minimum Distribution (RMD) that begins at around age 72.  You may have heard of this RMD requirement, but what is it?  An RMD is the amount of money the federal government requires you to draw out of your various retirement plans each year once you reach a certain age (currently age 72 as of the passage of the SECURE Act in December 2019).  The catch with RMDs is that if you don’t pull out your full RMD amount each year from your accounts, the IRS can levy a hefty tax bill (e.g., a 50% tax rate) on the unpulled remainder. 

With the above in mind, maybe you have been quite the saver in your Individual Retirement Account (IRA) and you have enough cash to settle comfortably into retirement.  As such, the RMD you are required to withdraw each year from your IRA accounts is subject to taxation and then may just remain unused.  Furthermore, this additional taxable income from your IRA RMD can push you into a higher tax bracket some years and can also reduce your eligibility for certain tax credits and deductions, as well as potentially affect Social Security taxability and Medicare surtax.  A great way to help both yourself and our rescue horses is to directly donate your Individual Retirement Accounts (IRA) RMD funds via a QCD to Walkin N Circles Ranch.

Something with this many acronyms must be difficult to do, right?  Generally speaking, no.  Gifting an IRA RMD as a QCD to us can be as simple as 1, 2, 3:

Step 1)  Already be age 72 on the date of distribution, i.e., your RMD requirement has already begun; 

Step 2)  Submit a distribution request form to your IRA custodian, requesting that the RMD asset transfer or check be made directly to Walkin N Circles Ranch, Inc.; and

Step 3)  Ensure that no tax withholding occurs from your QCD.

While the process of completing a QCD to a charity can be rather simple, a key clerical requirement is to make sure the distribution is made payable directly to the charitable entity. If the funds go to the account owner first (i.e., you), and then are distributed to the charity, the distribution will be a taxable event to the account owner and will not qualify for preferential QCD tax treatment.

With these steps in mind, consult with your IRA custodian on the easiest way to set up a QCD and what amount works best for you.  Fortunately, there is no set amount (or a recurring requirement) for a QCD donation - except an individual annual $100,000 limitation; accordingly, you can adjust the amounts you give each year  based on the state of your current financial affairs.

Notably, by giving your QCD to a qualified charity, you not only have given to a good cause, but you may also have lessened your tax liability with ole’ Uncle Sam come tax time.  Instead of paying taxes for that must-be-withdrawn money you don’t need, it can go directly to your charity of choice.

For further information on how to employ a Qualified Distribution Strategy (QCD) strategy, visit the Internal Revenue Service website (https://www.irs.gov/) or contact the author of this article, David L. Hogans, at david_intelligentinvesting@outlook.com or at his website. 

*This article is for informational purposes only.  The information contained herein is not intended to provide investment, tax, or legal advice.  Before pursuing any charitable giving plan, it is important to consider the financial and/or tax implications of doing so.  Discussing your gifting options with your financial advisor, accountant, or estate planning professional can help you select the best option available for your particular situation, thereby permitting a potential maximization of your gifting strategies while also minimizing your likely tax bill.