By Dale Michels, M.D.
Growing up, my family taught me early about giving. My parents didn’t make much money (some years they didn’t have to pay taxes) but they always gave to their church and other charities as they could.
When my wife and I got married 54 years ago, she, too, had grown up in a family where giving to God’s work was important. So, even though we were in school, we tried to be regular givers to our church and other ministries. After I started our medical practice, we were able to increase our giving and expand our giving to others as well. As our income changed and our needs changed, we could increase giving to God’s work.
When we retired, our salary dropped and we had to scale back some of our giving to organizations, but God graciously supplied our needs (and some of our wants) and allowed us opportunities to give from our after tax income.
During this time, our accountant and our retirement fund professional kept gently reminding us that the way we were doing our giving didn’t make sense in today’s world. Finally, after several years it sank in and we changed our process.
Let me explain: Each month we used to receive money from Social Security and our retirement account (401k). We would then pay taxes on this money. Then with what was left, we would give to our church, missionaries, charities, and live on the rest.
However, we discovered how to reduce the taxes and give what we were used to. We don’t get to deduct the giving, but we don’t have to declare the income or pay the taxes.
For example, in the old days: if we wanted to give $1,000 to a charity, we would take $1,200 from our retirement funds, have $200 sent to the government as taxes and give the $1,000. Our income would show that we had received $1,200 and we could deduct the $1,000 gift but it didn’t affect our taxes by $200.
In our world today, we can give a gift of $1,000 directly from our retirement funds. We can’t deduct it as a charitable gift but we also don’t have to show it as income. So, our income will go down, our gift to the charity will still happen, and we don’t have to pay any tax on that money. Since the government says you have to take a required minimum distribution (RMD)
every year by a certain age, it helps to know that giving in this way counts toward that RMD.
It took us awhile to figure it out, but it allows us to keep on giving and to save on taxes.
Dr. Dale Michels is chair of the Back to the Bible board, a local church leader, and a highly respected retired physician who practiced for over 44 years.
If you have questions about how to give directly from your retirement funds just as Dale is doing, please contact Bryon Swanson at Back to the Bible (402-464-7200 / bryons@backtothebible. org). Bryon will be glad to help you understand and implement this plan for yourself—without obligation.
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