Making Charitable Donations from your IRA

If you have reached age 70½ and are evaluating charitable giving options, you may consider making a charitable donation directly from your IRA.

The benefits

Contributions made directly from your IRA to a charity reduce the taxable portion of your IRA distributions and count toward your annual required minimum distribution (RMD).

For example, if your RMD is $10,000 and you give $2,000 to a charity directly from your IRA, then you are only required to take an additional distribution for the year of $8,000. In this example, only the $8,000 that you received is taxable to you.

In this way, charitable contributions made directly from your IRA are deductible to you even if you do not itemize your deductions. With the major federal tax reform law that went into effect in 2018, many more seniors are not itemizing their deductions. This means that the only way these seniors can receive a tax benefit for making charitable contributions is if the contribution comes from an IRA.

Additionally, because charitable donations made directly from your IRA reduce your taxable income, they can have a compounding beneficial effect. For example, the taxable amount of your Social Security benefits depends on your other income. By reducing your other income by making charitable contributions directly to a charity, it may also reduce the amount of your taxable Social Security benefits.

The limitations

• You must be over age 70½;
• Contributions cannot come from a SEP IRA or a SIMPLE IRA;
• The annual maximum that can be donated to charity from an IRA is $100,000; and
• Distributions cannot be made to private foundations, donor advised funds, charitable remainder trusts, or charitable annuity trusts.

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If you are interested in taking advantage of this provision, please do not hesitate to contact my office so we can discuss the details.