425 Magazine: Tax-Savvy Giving Tips

Feeling philanthropic? Brian Lockett sat down with 425 Magazine to give advice on how best to stretch your dollar when giving.
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The end of the year is upon us, and for many Americans, the holiday season translates into a spirit of giving. According to the Network for Good, which examines data on charitable giving, 31 percent of philanthropic donations happen in the month of December — with about 12 percent of giving taking place in the last three days of the year.

And while generosity is likely linked, in part, to the holidays, the tax year is also coming to a close, which is prescient especially to a certain subset of the population.

“If you’re 72 and have an IRA, you’re subject to something called a Required Minimum Distribution, or RMD, which requires you to take money out of that IRA,” said Brian Lockett, vice president and Certified Financial Planner™ at Comprehensive Wealth Management in Lynnwood. “Well, if you have other sources of income and decide you don’t want to take your RMD, you can actually donate those funds directly from your IRA to a charity. Most importantly, the funds should not be deposited into your bank account first; if given directly to the nonprofit, the donation amount can be deducted from your taxable income.”

The starting age for the RMD used to sit at 70 ½, Lockett said, until Jan. 1 of this year, at which time it was moved to 72. However, the age for making a donation directly from an IRA to a charity tax-free remains at 70 ½ ; in a country with 77 million Baby Boomers — many of whom are approaching or have already passed that age threshold — this tip pertains to quite a significant number of Americans, and is a contributing reason why the end of the year sees so much giving, according to Lockett. People need to take a certain amount of money out of their IRA(s), realize by the end of the year that they don’t need all of it, and offset their taxes via this method, known as a Qualified Charitable Donation (QCD).

“If you’re at least 70 ½, you’re often better off to donate directly from your IRA compared to simply writing a personal check, even if you are itemizing,” Lockett said. “You can tell Schwab, Fidelity, or whoever you use as your IRA custodian to cut a check payable to the charity of your choosing, or you can set up a checkbook on your IRA and cut checks directly to the charity(ies) yourself. The key is you do not deposit those checks in your bank account first. They must go directly from your IRA(s) to the charity(ies). If those checks don’t clear before year’s end, they don’t count as a donation made that year. So, it’s really important not to wait too long. I’d say come Thanksgiving, you need to have your charitable giving plans figured out and start writing your checks — do not wait until Christmas.”


Read the complete interview with Brian in 425 Magazine.

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