If You Don't Want an IRA Distribution, You Can Donate It to Charity
Not everyone wants to take the required minimum distributions from their retirement accounts right away. If you don’t want your distribution, one option is to donate it to charity and get a tax deduction.
You are required to begin taking distributions from your tax-deferred IRA when you reach age 72 (70 ½ if you turned 70 ½ in 2019 or before) even if you don’t need the money. The distributions are added to your income and taxed at your highest marginal rate, perhaps even at a higher rate than your other income if you’re right at the threshold between two rates. You’re more likely to have to pay a higher rate on this income if you are still working.
If you don’t want the distribution, you may want to consider donating the distribution directly to charity through a qualified charitable donation. By donating your required minimum distribution, the distribution won't be included in your gross income, which means lower taxes overall.
A qualified charitable donation can also be a good way to get a tax deduction since after the 2017 tax law doubled the standard deduction, it makes sense for many fewer people to itemize. If your charitable contributions along with any other itemized deductions are less than $12,950 a year (in 2022), you will no longer get a deduction for your contributions to charity (which can be a disincentive to donate to charity). However, substituting a qualified charitable donation for your RMD is a way to make a donation and receive a tax benefit from it.
In order for the donation to count as a required minimum distribution, the donation must be made directly from the IRA to the charity. Funds distributed directly to you do not count. The charity must be approved by the IRS, and different IRAs have different rules about how to make the distributions. If you make a qualified charitable donation, you cannot also itemize the deduction. The maximum amount you can donate is $100,000. If you donate less than your required minimum distribution, you will need to take the remainder as a distribution.