From IRA to Charity

Arranging for a transfer to charity from an IRA may have better tax results.

Courtesy of Heartland Bank
IRA charity

Taxpayers who are older than 70½ may arrange for a tax-free transfer of up to $100,000 per year from their IRA to the charity of their choice. Those of that age must also take required minimum distributions (RMDs) each year from their IRAs. But these two things can go together.

A direct transfer to a charity from an IRA counts toward one’s RMD for that year. In fact, some retirees simply direct their IRA custodian to send the RMD to a charity, without worrying too much about the amount.

There’s no tax deduction when one does this, because the distribution is not included in taxable income, as would be the usual case with an RMD. But the avoidance of income inclusion is more valuable than getting a tax deduction. For example, it may avoid additional income taxes on Social Security benefits that otherwise could be triggered by an RMD.

This year, fewer taxpayers will be itemizing, thanks to the doubling of the standard deduction. For these taxpayers, arranging for a transfer to charity from an IRA will have better tax results than simply making a gift of cash in the same amount. PM

This information is not intended to be and should not be treated as legal advice or tax advice. Readers should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific legal or tax advice from their own counsel.

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