Friday, 14 April 2017 15:57

Q: Can I make a charitable gift from my IRA without paying income tax on the distribution? A: Yes, but there are a few requirements.

By Peter Sweetser | Families Today

The writer is a Retirement Plans Specialist at Fenimore Asset Management, the investment advisor to FAM Funds, headquartered in Cobleskill, NY with a branch office in Albany.

An IRA Qualified Charitable Distribution (QCD) is an alternative way for you to give to a charity without paying income tax. The QCD was put in place permanently as part of H.R.2029 — Consolidated Appropriations Act, 2015. 

Here is how it works. Firstly, to be eligible, the account holder must be 70½ or older at the time of the distribution. Secondly, a QCD can only be made from a Traditional or Roth IRA. Thirdly, each individual can donate up to $100,000 per year to one or more qualified charities. 

Unlike a typical IRA distribution, no income tax is paid. Please note: the taxpayer cannot take the contribution as a charitable deduction on their Federal Income Tax return — the amount is not included in the donor’s gross income. However, it can be counted as all or a portion of one’s IRA required minimum distribution. If you are uncertain, confirm with the organization that it is qualified to accept tax-deductible charitable contributions. Finally, the check should be made payable to the charity.

There are more details to consider and an IRA QCD is not right for everyone, so speak with an investment professional and discuss what might be right for you. As always, I recommend including your accountant or tax preparer in the decision before you make a transaction.

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