On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
Article Highlights
- Direct IRA-to-charity transfers are allowed in 2013 for taxpayers age 70½ and over.
- Maximum transfer allowed is $100,000.
- Transfer counts towards the required minimum distribution.
- Beneficial for taxpayers with Social Security income and those who do not itemize their deductions.
For 2013, if you are age 70½ and over, you are allowed to make direct distributions (up to $100,000) from your Traditional or Roth IRA account to a charity. The distribution is tax free, but there is no charitable deduction, and the distribution can count toward your required minimum distribution (RMD). This provision can be very beneficial for a taxpayer who is inclined to make substantial charitable contributions for the year and:
- Receives Social Security (SS) benefits, and the taxpayer’s required minimum distribution for the year causes an increase in the tax on the SS benefits; or
- Is unable or is marginally able to itemize deductions for the year.
Arranging a direct transfer may require some extra time, so if you want to donate some of your IRA to a charity, don’t wait until the last minute to make arrangements with your IRA trustee to do so.
The higher a taxpayer’s income tax bracket, the greater the tax benefits when making a direct IRA-to-charity distribution. Please contact this office if you have questions related to the tax benefits derived from this strategy.