Taxpayers that are age 70 and a half may direct their IRA to make a direct contribution to a qualified charity of up to $100,000. This contribution counts toward the required minimum distribution. The advantage to this is that the distribution to the charity is not included in the taxpayer’s adjusted gross income (AGI). This could further reduce their tax since certain taxes, income and deduction items are directly affected by AGI. Only an IRA is eligible to make this contribution. SEP IRA’s and other qualified retirement plans are not eligible.
Congress is currently considering significant changes to the tax code. One of these changes is to significantly increase the standard deduction amount so that fewer taxpayers will be able to itemize their deduction. At least one of the proposals also eliminates the state tax deduction from itemized deductions. If these changes are passed, then the ability to make charitable contributions from IRA’s will be much more valuable for taxpayers aged 70 and a half if Congress does not also make changes to the contribution rules.
Stay tuned to the news and to our blog for updates as Congress works through the proposed tax changes. If you have any questions, please click the button below to speak with one of our Certified Public Accountants.