Last Year to Take Advantage of IRA-to-Charity Contributions

If you are at least 70.5 years old and are thinking of making a donation to a charity, you may wish to consider making an  IRA to Charity contribution.

For 2013 (this is the last year without an extension by Congress), you can donate up to $100,000 to your favorite charity—provided it is an eligible charitable organization—tax-free from your Traditional IRA, Roth IRA, SEP, or SIMPLE IRA. To be considered valid, the distribution from the IRA to the charity must be made directly. It cannot pass through your hands or through other accounts.  Note: These distributions are not permitted from ongoing SEP or SIMPLE plans—that is, plans to which a contribution has been made for the year.

Here are the pertinent facts about making a donation using this provision of the law:

• The distribution is not taxable and does not add to your income for the year. The advantage is that it keeps your income low and helps minimize your taxable Social Security income and tax disadvantages associated with higher income.
• There is no charitable donation, since the distribution was tax-free.  This can be a considerable benefit, however, to taxpayers who take the standard deduction and do not itemize anyway.
• If you have not already taken your required minimum distribution (RMD) for the year, the charitable distribution can count toward this year’s RMD.

If you need assistance planning your pension distributions or have any questions about this article, give us a call at 559.924.1225.