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

Posted at 8:25 AM, Jan 02, 2024
and last updated 2024-01-02 10:33:39-05

COLORADO SPRINGS, Colo. — Nonprofits saw a dip in donations in 2023, and many organizations had trouble meeting their end-of-year quotas.

There is a way Coloradans 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 70s have to decide what to do with the mandatory withdrawal from either their 401(k) funds or other retirements funds. They can then donate that money to a charity, which is tax free, so it's a win-win.

The National Alliance on Mental Illness (NAMI), a Colorado Springs nonprofit described the downturn in donations they saw in 2023.

"Inflation has definitely impacted a lot of people pretty significantly," Kirk Woundy with NAMI said. "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."

Any distributions or gifts must be given before Dec. 31 to count toward your taxes.

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

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