Christopher Conner: Utilizing Your IRA for charitable gifting


Published: Friday, January 7, 2011 at 4:31 p.m.
Last Modified: Friday, January 7, 2011 at 4:31 p.m.

Included in the 2010 Tax Bill (HR 4853), Congress has again allowed charitable donations of individual retirement account assets for tax payers 70-and-a-half and older for tax year 2011. Recall that IRA assets are always subject to income tax (even to beneficiaries) and are included in your estate tax calculation.

It allows a taxpayer who is 70-and-a-half years or older to contribute a total of $100,000 in IRA assets to one or more qualified charities or non for profit institutions (UF, your church, STOP Children’ Cancer etc) of your choice. The payout can satisfy your required minimum distribution. While the donor gets no deduction, he or she does not have to report the payouts as income.

The potential benefit for the donor is that he or she does not have to withdraw the funds, pay taxes and then try to deduct the contribution. The deduction itself could be limited because of other tax rules or else the donation might increase the donor’s reported income, possibly raising Medicare premiums or taxes on Social Security payments. Rather, the donation is not included for tax calculations.

It is important that the gift is transferred from the IRA sponsor directly to the qualifying charity. The charity must send a letter to the donor confirming the gift. As a matter of practice, I normally send a letter to the charity informing them of the amount of the gift and the name of the IRA sponsor, so they can be on the lookout for the check.

As always, please check with your CPA or financial advisor to determine if this is an effective gifting strategy for your particular situation.

Christopher J. Conner,

Certified Financial Planner

Gainesville

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