A lot of people in the US have some kind of retirement account. People like 401(k)s, IRAs, and other similar ways to save because they offer tax breaks. However, they also have rules that can make them hard to manage.

Because the money in these accounts is meant to be used in retirement, beneficiaries have to take money out of them every year. These required minimum distributions, or RMDs, are what people call these withdrawals.

It is very important to understand the rules about these RMDs so that you can be sure that all of your hard-earned money is used for what it was meant for and not to pay IRS fines. After that, here are some rules you should know.

RMDs are no longer required from Roth 401(k)s or Roth 403(b)s

The main reason why RMDs are needed is that many accounts got tax breaks, and the government needed to get its tax money at some point. Roth 401(k)s and 403(b)s were always funded with money that had already been taxed, but until now, RMDs had to be made. One common way around this was to move the money to a Roth IRA, which could be hard to do and took time.

The IRS thankfully got rid of this rule, so now all funds in Roth retirement accounts don’t have to be taken out as RMDs. This means you can keep the money in those accounts forever.

People over 73 will need to take their first RMD before April 1, 2025, even if they have a tax-deferred account. This means that they will still be taxed. You will have to take the money out and pay taxes before December 31 of each following year.

Qualified charitable distribution limits are increasing

Some people are lucky enough to have saved more money than they need, so taking their RMDs is just an extra tax payment for them. There is a way to ease this tax burden, though: you can make a qualify charitable distribution (QCD).

Since not taking out an RMD when it’s due comes with a 25% fine, taxes on the amount, and the amount still needs to be taken out, it makes more sense to donate the money and get a tax break in the long run. The money you take out of the account won’t be added to your taxable income, and you may be able to get more tax breaks.

There was a $100,000 QCD cap in 2023, and there was a $105,000 QCD cap in 2024. The number for 2025 is still not clear, but it is known for sure that it will go up again. That being said, only the richest retirees could afford a QCD of this amount every year. It is still an option for those who don’t want to pay too much in taxes. To help people in need, every dollar counts.

Keep in mind that not all charities will qualify for this QCD. The IRS says that it must be a tax-exempt organization; if it is not, it will not count. Once you’ve chosen a charity, you will need to call your retirement account provider and ask that the money be sent to the charity instead of your bank account.

If the money goes through your account, it will count as a tax deduction but not as a QCD, so make sure you follow the rules to make sure it’s worth it.

Last but not least, you will need a written receipt from the charity that shows the date and amount of your donation. While most charities should be able to and willing to do this, you should call them first to let them know that you will need this after you donate, just in case.

This paper isn’t needed for your taxes, but if you get audited, they will ask for it so that your QCD doesn’t get thrown out.

Read Also :- Another New IRA Change Announced for 2025 – Rules Will Be Very Different from That Date

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