February 28, 2013
What You Need To Know About Charitable Donations/Distributions
Direct IRA to Charity Donations
As part of The American Taxpayer Relief Act of 2012, charitably inclined IRA owners can make qualifying charitable distributions (up to $100,000) directly from their IRA’s in 2013. The amount withdrawn from the IRA is excluded from income; however the taxpayer is not allowed a charitable deduction.
Important Aspects of the Qualified Charitable Distribution
- A qualifying taxpayer is a traditional IRA owner age 70½ or older
- Distributions up to $100,000 in the aggregate qualify
- May be used to meet Required Minimum Distribution(RMD)
- Payment must be made directly from IRA to Charity
- Distribution CANNOT be made to Private Foundations, Donor Advised Funds, or Charitable Remainder Trusts
- Will expire on 12/31/13 unless extended
Possible Benefits of the Qualified Charitable Distribution
The amount of the Qualified Charitable Distribution will be excluded from a taxpayer’s gross income for 2013 which will reduce the taxpayer’s Adjusted Gross Income (AGI). A taxpayer’s AGI plays a critical role in determining different tax consequences. Possible benefits of reduced AGI include:
- Possible reduction in the Medicare Surtax
- Increased itemized deductions that would be lost due to AGI limitations
- Increased personal exemption credits that would be lost due to AGI limitations
- Decreased taxability of Social Security Benefits
The Qualified Charitable Distribution may be a valuable addition to your comprehensive tax reduction strategy for 2013. We welcome the opportunity to review this plan as part of your overall financial strategy.