Due to recent tax changes, nearly two-thirds of people who once itemized deductions no longer do so. However, if you are least 70½ and have an IRA, an excellent tax savings vehicle remains for gift giving.
The tax law requires individuals who are at least 70½ to withdraw a certain amount every year and to pay income tax on it. This is called your required minimum distribution.
A separate law, however, says that if you make direct charitable gifts from these IRAs, you do not need to show these distributions as income.
Example: Bob has a required minimum distribution in 2019 of $4,000, which will be taxed as ordinary income. Instead of taking the distribution himself, Bob directs the plan administrator to distribute $1,000 directly to The Cedars and another $1,000 to a different charity. He receives the remaining $2,000 distribution himself. Bob must only show $2,000 in ordinary income; the $2,000 to charities passes tax free.
Although the example refers to the required minimum distribution, the annual maximum is actually $100,000. This makes IRA giving an excellent vehicle for fulfilling a charitable pledge as well.
Tax benefits vary in individual circumstances. You should always consult your financial advisor before making tax decisions.
For more information about these and other ways to make tax-wise gifts, please contact the Development Office at email@example.com or 207-221-7007