Charitable Giving From an IRA

Chris Eichmuller, CPA has information on a different way to make charitable donations:


Are you over 70 ½?  Are you required to take distributions from your IRA?  Are you a charitably-inclined person?

The recently enacted “Protecting Americans from Tax Hikes Act of 2015” contains a permanent extension of the popular rule allowing tax-free IRA distributions of up to $100,000 if donated to charity. The rule allows IRA owners who are 70-1/2 or older to direct up to $100,000 of their IRA distributions to charity. The money given to the charity counts toward the donor’s required minimum distribution, but doesn’t increase the donor’s adjusted gross income or generate a tax bill.

Keeping the donation out of the donor’s AGI is important because doing so (1) helps the donor qualify for other tax breaks (for example, having a lower AGI can reduce the threshold for deducting medical expenses, which are only deductible to the extent they exceed 7.5% of AGI -10% of AGI for people under age 65 and for everyone after 2016); (2) reduces taxes on the donor’s Social Security benefits; and (3) helps the donor avoid a high-income surcharge for Medicare Part B and Part D premiums (which kick in if AGI is over certain levels).

Some clients have designated charities as beneficiaries of their IRAs.  This permanent change has given those clients the ability to enjoy donating to their favorite charities during their lifetime instead of waiting until their passing.

Whether you decide to donate to charity or not, don’t forget to take your RMD before December 31 if you are 71, or April 1, 2017 if you just turned 70 ½ in 2016.

If you would like more details, please do not hesitate to call our office.