A message from the House of Charity

A message from the House of Charity

Retirement is a goal for many, and putting money away helps us to plan for our future retirement. Many of us choose to invest in a tax-deferred 401(k) or IRA. This enables us to save for our future as well as decrease our income tax burden. However, at age 70 ½, we are required to take annual withdrawals from tradition retirement accounts. These annual withdrawals are considered taxable income and will be added to your AGI (Adjusted gross income) at tax time. In addition, if you skip a required annual withdrawal, there is a 50 percent penalty on the amount that should have been withdrawn.

Pay now or pay later.

The good news is, if you do not need your distribution for living expenses, you can avoid the income tax on your required annual withdrawal by making a tax-free contribution to a qualified charity. Those who meet the age requirement of 70 ½ or older can make a contribution of up to $100,000. If you are filing a joint return, your spouse can also make a $100,000 contribution. This means couples can exclude up to $200,000 of their retirement savings from income tax if they donate to a charity. If you donate more than the maximum allowed, it will be considered income and will be subject to income tax.

A qualified charitable contribution must be made by Dec. 31 of the tax year in order to exclude that amount from taxable income. Remember, this money is not being taxed; therefore you will not be able to claim it as an additional charitable deduction.

These charitable contributions can only be made from IRAs. If you have a 401k, in order to take advantage of the tax-free charitable contribution, you may want to roll it over into an IRA.

Consider the House of Charity — Bishop’s Annual Appeal for your charitable contributions.

To learn more about the House of Charity – Bishop’s Annual Appeal, please visit http://www.camdendiocese.org/hoc/ or call the Appeal office, 856-583-6127

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