Article Highlights
- Direct
IRA-to-charity transfers are allowed in 2013 for taxpayers age 70½ and
over.
- Maximum
transfer allowed is $100,000.
- Transfer
counts towards the required minimum distribution.
- Beneficial
for taxpayers with Social Security income and those who do not itemize
their deductions.
For
2013, if you are age 70½ and over, you are allowed to make direct distributions
(up to $100,000) from your Traditional or Roth IRA account to a charity. The
distribution is tax free, but there is no charitable deduction, and the
distribution can count toward your required minimum distribution (RMD). This
provision can be very beneficial for a taxpayer who is inclined to make
substantial charitable contributions for the year and:
- Receives Social Security (SS)
benefits, and the taxpayer’s required minimum distribution for the year
causes an increase in the tax on the SS benefits; or
- Is unable or is marginally able to itemize deductions
for the year.
Example:
A 75-year-old married taxpayer’s adjusted gross income (AGI) before taking his
RMD is $28,000. His RMD for the year is $10,000, and he wishes to contribute
$8,000 to the building fund for his house of worship. If he takes his RMD and
then contributes the $8,000 to the building fund, his AGI will be $38,000; it
will be more, if his income includes SS benefits. On the other hand, if he
makes a direct transfer of the $8,000 to his house of worship, his AGI would
only be $30,000; some or all of his SS benefits would be tax free, depending
how much he receives in SS benefits.
Arranging a direct transfer may require
some extra time, so if you want to donate some of your IRA to a charity, don’t
wait until the last minute to make arrangements with your IRA trustee to do so.
The higher a taxpayer’s income tax bracket,
the greater the tax benefits when making a direct IRA-to-charity distribution.
Please contact our office if you have questions related to the tax benefits
derived from this strategy.
(601)649-5207
(601)649-5207
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