There are many ways to support a local charity. You can volunteer your time, give items directly to a charity, or donate money. How you choose to give is deeply personal, but those who donate financially may find their contributions go further with a Donor-Advised Fund. David Mitchell, CFP® with Edward Jones in Easley recently discussed the benefits of creating a Donor-Advised Fund:

What is a Donor-Advised Fund, and how does it work?

“A Donor-Advised Fund is a charitable-giving tool that you create with a financial services institution by making a $10,000 (or more) irrevocable contribution to start the fund. You can contribute appreciated assets and investments (you avoid paying capital gains tax), proceeds from the sale of a business, or cash to start your Donor-Advised Fund. You immediately qualify for a tax-deduction. Your fund is invested and grows tax-free, and you can even make additional donations to your fund over time,” said Mitchell.

What charitable organizations qualify to receive support
from your Donor-Advised Fund?

“You can choose which IRS-approved, public charity (or charities) to support,” said David. “And, you choose when and how much to support
the charity of your choice from your Donor-Advised Fund.”

How long does a Donor-Advised Fund last?

Mitchell said that “annual disbursements from a Donor-Advised Fund aren’t required by law, so your fund can stay in existence, and grow, until you decide to allocate it. Should you die, you decide who takes over your Donor-Advised Fund, and what charities to support in your absence.”

Be sure to reach out to your financial advisor or a financial services institution for more information on creating a Donor-Advised Fund.

If you are age 72 or older, the IRS requires you to take a required minimum distribution each year from your tax-deferred retirement account. Did you know that you can donate all, or a portion of your Required Minimum Distribution directly to United Way of Pickens County or another charity? It's called making a Qualified Charitable Distribution.

A Qualified Charitable Distribution is a transfer of funds from your IRA payable directly to a charity. Amounts distributed can be counted toward satisfying your annual Required Minimum Distribution. The Qualified Charitable Distribution is excluded from your taxable income. This isn’t the case with a regular withdrawal from your IRA, even if you use that money to make a charitable donation later.

Here are four ways that a Required Minimum Distribution can increase your taxes:

1. A Required Minimum Distribution can push you into a higher tax bracket. Since distributions are ordinary taxable income, it can push some retirees into a higher marginal tax bracket.

2. Medicare surtax. Required Minimum Distributions also increase the taxpayer's modified adjusted gross income, which could trigger the 3.8% Medicare surtax.

3. Taxing Social Security. Even modest withdrawals from a retirement account can cause Social Security benefits to become taxable for federal income tax, up to 85% for single filers with income above $34,000
annually or married couples with income above $44,000.

4. Medicare Part B & D Premiums are calculated using a taxpayer's modified adjusted gross income from the prior year. So large Required Minimum Distributions can cause sharp increases to your Medicare costs, with the wealthiest taxpayers paying up to 80% of the cost.

Be sure to contact your local accountant or attorney to discuss your specific situation before making a donation.