Tax Advantages for Charitable Contributions from your IRA
Congress voted to make permanent the tax legislation that allows taxpayers age 70½ and over to exclude from income their donations made directly to charities (up to $100,000 per person, per year).
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Since the IRA distribution is excluded from income, AGI is lower than it would be if the contribution were not made. Lowering AGI can be very valuable given that literally dozens of tax calculations are based on AGI. In addition to the tax advantage, the donation to charity counts toward the taxpayer’s Required Minimum Distribution (RMD).
These qualified charitable distributions (QCD) may be made from any IRA or individual retirement annuity, but not from a simplified employee pension, a simple retirement account or an inherited IRA. QCD distributions can NOT be distributed from the IRA to the IRA owner and then contributed to charity – they must be direct to the charity.
The donator may not receive anything from the charity as a quid pro quo for their contribution; and the charity must provide 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 the donator in consideration for the distribution from the IRA. Additionally, charitable contributions cannot go to a donor-advised fund, a private foundation or a supporting organization as outlined in IRS Section 509(a)(3).
Talk with your accountant to be assured that a direct IRA contribution is the most advantageous for your situation.