For those 70 ½ you can give directly to charity with your required minimum distribution. Why is this important?

Those over age 70 ½ need to take Required Minimum Distribution (RMD) from their non-taxable retirement accounts. This means an annual distribution from the Traditional IRA, 401k, 403b or Thrift Savings account that was contributed to with tax-free contributions and grew tax-free. The RMD does not affect Roth IRAs.

If this means you will be getting a RMD before the year end, consider this – your RMD from a Traditional IRA can go directly to charity. This is a tax-free transfer if the money goes directly from your IRA retirement account. This does not apply to your other retirement accounts unless the 401k or 403b is first rolled over to an IRA.

If you tend to give to charity a similar amount to your expected RMD, this type of planning needs to be in your financial tool box. Not only will it save taxes because the RMD is not counted as income, your income will be lower than if you took the money and wrote the check to charity. This is critical in planning cash flow because Medicare Part B premiums are based on your income. Here in Vermont, property taxes are also based on annual income. Removing income from your tax filing may help you in other ways.

The law, which allows tax-free transfers of up to $100,000 from an IRA to a public charity is a great opportunity for 2017. Just remember, you will not be able to use the charitable deduction again if you itemized for your taxes.

Move quickly because though this is a possibility for the tax year ending December 31st, your financial institution is busy this time of year. You will want the request and paperwork to be in process before December 15th to be sure this happens in a timely manner.

Finally, review with your tax advisor to see if this makes sense for you.