Photo: Mike McKay
Clark Lake is hard to leave behind. It tugs at your heart no matter how or when it became part of your life. Many have found ways to establish lasting Clark Lake connections through plaques on the Welcome to Clark Lake Sign, taking part in the Community Center restoration, brick program, or the Clark Lake’s Memory cemetery improvements.
Now there is something new – the Clark Lake Forever Fund. This works like an endowment. Funds received by the Clark Lake Spirit Foundation will be invested – and only the proceeds will be spent, and only to the benefit of Clark Lake. Those who contribute will be recognized on the Clark Lake Forever Fund page on ClarkLakeSpirit.com.
The Clark Lake Spirit Foundation is an IRS qualified 501c3. That status offers tax advantages in several different ways. One of them has to do with the following.
Are you faced with taking a required minimum distribution (RMD) from an IRA or inactive SEP/Simple IRA this year? If so, you likely know the tax consequence. The distributable portion of your IRA is taxed as ordinary income. Your tax bracket determines the degree of pain. If you don’t need all or part of your RMD, consider skipping the tax consequence through use of a qualified charitable deduction (QCD). The Clark Lake Spirit Foundation is a 501(c)(3) tax exempt organization and is qualified to receive a QCD. This is one method to avoid painful taxes and support the Clark Lake Forever Fund legacy.
The Foundation does not offer financial or tax advice, but here are some thoughts that could be useful.
Taxpayers who own tax deferred retirement savings accounts (Traditional IRAs, inactive SEP and Simple IRAs) must make taxable withdrawals (RMDs or Required Minimum Distributions) annually based on their age, which under the SECURE ACT 2.0 is currently:
Tax-deferred accounts permit taxpayers to defer income tax on their contributions and earnings during working years. Normally, distributions from these accounts are taxable when received.
Taxpayers who fail to take timely RMDs face an additional and sizeable excise tax, or penalty which is not deductible. The SECURE ACT 2.0 reduced the excise from a whopping 50% to 25%, and may be reduced to 10% if the RMD is corrected by the taxpayer in a timely manner.
Qualified Charitable Distributions (QCDs) can provide an attractive alternative to satisfy RMDs and optimize tax benefits of giving. QCDs are tax free so long as they are paid directly from the IRA to an eligible charitable organization, and provided certain conditions are met, namely:
- The taxpayer must be age 70-1/2 or older when the QCD is made.
- QCDs must be made directly by the trustee of each taxpayer’s tax-deferred savings account, e.g., IRA, inactive SEP, etc. to the charity. The charity must be a qualified IRC § 501(c)(3) charitable organization like the Clark Lake Spirit Foundation.
QCDs allow individuals 70 ½ or older to potentially satisfy all or part of their annual RMDs. Under the new SECURE 2.0 Act rules, the annual limit is now indexed to inflation. For 2024, the QCD limit has increased to $105,000. You can also use up to $53,000 of a QCD to make a one-time donation to a Charitable Remainder Trust (CRT) or Charitable Gift Annuity (CGA). QCDs don’t count as income. You don’t deduct them on your return, but their tax benefits can outweigh those of donating cash or other assets to charity. For retirees who have accumulated significant savings in their tax-deferred accounts, the onset of RMDs can have serious tax consequences. The higher the balance in your tax-deferred accounts, the higher your RMDs, and potentially the higher your tax bracket.
Mandatory distributions from inherited IRAs are also eligible for QCD treatment.
Finally, since a QCD is tax free, it is not included in determining an individual’s Adjusted Gross Income, which is a metric calculation the IRS uses in setting or limiting the value of certain itemized deductions. Individuals may still itemize or claim a standard deduction with QCDs, including charitable contributions that are not QCDs.
Photo: Ern Belcher
The Clark Lake Spirit Foundation recommends consulting your tax advisor.
