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Making Donations From Your IRA Can Bring Tax Benefits

Published March 7, 2013

Congress has renewed a charitable rollover provision for individual retirement accounts (IRAs) that applies to people age 70-and-a-half and older.  The provision had expired and has now been renewed through the end of 2013.  The provision has several tax benefits.

IRA owners who meet the minimum age requirement can donate up to $100,000 directly from their retirement account to charities such as churches, schools and other nonprofit organizations – although not most private foundations.

The gift cannot be claimed as a charitable deduction on the IRA owner’s tax return, but there are other benefits.  The donation does not count as taxable income, but does count as part of an IRA owner’s required annual withdrawal.  The donation does not raise adjusted gross income, so it will not affect Social Security benefits or Medicare premiums.  Eligibility for several other taxes and tax benefits are determined by adjusted gross income, such as a new phasing out of itemized deductions and personal exemptions, a new tax on investment income, and other tax credits and deductions.

Making donations from an IRA can be a good idea if you are concerned about minimizing adjusted gross income, if you do not itemize deductions, or if you do not have many liquid assets other than your IRA.  You can best decide whether such a donation is the right move for you by consulting with your estate planning attorney or tax professional.

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