After being halted for a year, RMDs are back! Those with traditional IRAs and who are 72 years and older must take annual required minimum distributions (RMDs).

If 2021 is your first RMD year, you have until April 1, 2022, to take the RMD. If you opt to defer your first RMD to 2022, you will be taxed in 2022 on two payouts: the one for 2021 that you deferred and the RMD for 2022. This doubling up would hike your 2022 income and could push you into a higher income tax bracket (so it is unlikely that you will want to defer the RMD to next year).

Charitable donations made directly from a traditional IRA can save taxes. Account owners who are 70 1/2 and older can transfer up to $100,000 yearly from IRAs directly to charity. If married, you and your spouse can give up to $100,000 each from your respective IRAs. These “qualified charitable distributions” count as RMDs, but they are not taxable, and they are not added to you AGI (so you do not include these qualified charitable distributions on Schedule A as an itemized deduction). The IRA-to-charity strategy can be a good way to get tax savings from charitable gifts for taxpayers who do not itemize because of higher standard deductions. The money must go directly to a charitable organization.

If you are subject to an RMD in 2021 and have not yet satisfied the minimum amount, expect to hear from us in the next couple of months. If you are 72+ this year and have a retirement account (IRA, 401k, 403b, etc.) not managed by Southern Capital, you are likely subject to RMDs, so please don’t overlook those account (we can help).