July 21, 2024
Funds

Mandatory withdrawals from retirement funds can be donated to charity tax free


COLORADO SPRINGS, Colo. — Nonprofits have seen a dip in donations this year as many are having trouble meeting their end of year quotas.

Despite this, there is a way people can help while also receiving a tax break in the process. These nonprofits can benefit from what are called “required end-of-year distributions.”

For example, some people in their 70’s have to decide what to do with mandatory withdrawal from either their 401(k) funds, or from other retirements funds. They can then donate that money to a charity, which is tax free, so it’s a win-win.

News5 spoke with the National Alliance on Mental Illness (NAMI), a local nonprofit on Friday about the downturn in donations this year.

“Inflation has definitely impacted a lot of people pretty significantly,” said Kirk Woundy with NAMI. “I have seen some statistics that say there has been as much as a 30% drop in donations, related largely to inflation this year. So, yeah, nonprofits are scrambling to meet their year end goals.”

You have to act fast to take advantage of this tax break. Any distributions or gifts must be given before Sun. Dec. 31 to count for this year’s tax bill.

To learn more about the nonprofit, visit the National Alliance on Mental Illness Website.

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