Can you make a charitable contribution with your IRA? The answer to this question is YES if you are 70 ½ and older.
Individuals 70 ½ or older have the ability to make a qualified charitable distribution up to $100,000 per year directly to a charity of their choice. By making the distribution directly to the charity, the income from the IRA is not taxable to the individual’s tax return and in essence gives the charitable deduction right off the top of your gross income without any consideration of many itemized deduction or other adjusted gross income limitations.
The qualified charitable IRA distribution is very useful for individuals who no longer itemize as is the case with many individuals over 70 ½ due to the fact they no longer have a large home mortgage interest deduction causing them to itemize. Again, this distribution allows the deduction right off the top of your income whether you itemize or not.
The availability of this distribution was made permanent as part of the 2015 PATH Act and will now allow many individuals to reduce their estate by giving to charities before their death without paying tax on the IRA income. Keep in mind this distribution is only allowed on regular IRAs and not on SEP, SIMPLE IRA or other qualified retirement accounts.
If you are considering a charitable gift and want to know how the IRA option may affect your return, please give us a call at 1-866-287-9604 so we can ensure you take advantage of this wonderful tax-planning tool.
Posted by Lisa Foley, CPA, CGMA