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IRA Distributions to Charity

Last December Congress passed a tax package that made permanent a tax break for IRA distributions contributed directly to qualified charities for taxpayers aged 70 ½ and over. This is called a “qualified charitable distribution.”

At age 70 ½ taxpayers are subject to “required minimum distributions” (RMD) from their IRA accounts.  The amount required to be distributed is determined by a factor based on age and the total balance in the IRA accounts at the end of the previous year.  These distributions are subject to income tax and may contribute to limitations on itemized deductions, personal exemptions, and rental real estate losses – to name a few.  These distributions can also increase the amount of tax due on social security income.  Qualified charitable distributions count towards a taxpayers RMD total for the year and are not included in taxable income.   However, the maximum that can be excluded from income is $100,000 each year and the donation may not be deducted elsewhere on the return.

In order to qualify for the income exclusion, the organization that received the donation must be a public charity, the payment must also follow the IRS guidelines for qualified charitable contributions (See BHB article for qualified charitable contributions), and it must be a direct transfer from the IRA trustee to the charity.  This last one is very important.  If it is distributed to the IRA account owner and then donated it does not qualify for the exclusion.

This is just one of many options when it comes to making charitable contributions.  A conversation with your tax advisor can determine which option is the best for your overall goals and, of course, to minimize your tax liability come next April.


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