Authored by Barbara A. Blashka, Tax and Financial Officer.
Congress recently made permanent the option for a taxpayer over the age of 70 ½ to make distributions directly out of an Individual Retirement Account (IRA) to charities and exclude the amount from income. As with all tax breaks, technical rules exist, but the rule generally states:
- Charities can receive a direct distribution from a taxpayer’s IRA who has reached 70 ½ years and older;
- The distribution will count towards the taxpayer’s Required Minimum Distribution (RMD);
- Each taxpayer can donate up to $100,000 per year that can be excluded from income.
- The charity must provide you an acknowledgement stating the amount of the charitable distribution and that no goods, services, or benefits of any kind were or will be provided to you as a result of the donation;
- The distribution cannot go to a donor-advised fund, supporting organization, or private foundation;
- The distribution cannot be made from employer sponsored plans (SEP and SIMPLE IRAs) if a contribution is made for that year.
- The taxpayer must itemize deductions on his or her tax return.
- Since both the IRA distribution and the charitable contribution are excluded from income, the deduction directly lowers the taxpayer’s Adjusted Gross Income (AGI);
- The charitable donation is not limited by AGI thresholds like many other tax deductions;
- Lowering AGI may also help other tax deductions have more impact.
Laurene Brooks joined Legacy in 2004, shortly after the company’s inception. She earned undergraduate degrees in journalism and Spanish, and her Juris Doctor (JD) designation from Marquette University. Laurene has over 30 years of experience in law and relationship management. In addition to assisting clients with financial management and estate planning, Laurene is Legacy’s senior fiduciary officer. In addition, she was a member of the Real Property, Probate, and Trust Division of the Wisconsin State Bar for 10 years and served as chair.
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