As year-end approaches, taxpayers who are 70-1/2 years of age or older should be aware that they can make tax-free charitable donations of up to $100,000 directly from their IRAs. To qualify, the funds must be transferred directly by the IRA trustee to the eligible charity.
An advantage to direct transfer (instead of taking a distribution and then making a donation) is that any distributions will be excluded from your adjusted gross income, but you will not get a charitable donation deduction.
Some of the advantages of this method include:
- Reduced phase out of itemized deduction
- Reduced phase out of exemptions
- Avoid having part of the charitable donation as non-deductible
- Avoid an increase in the possible disallowance of medical expenses
- In some states this avoids state income tax
Amounts transferred to a charity from an IRA are also counted in determining whether you have met the required minimum distribution (RMD) from your IRA.
Before making any decisions on charitable donations from your IRA, it is important that you consult with a qualified tax consultant. If you have any questions about this option, please contact the Gray, Gray & Gray Tax Department at (781) 407-0300.