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Clock Is Ticking

If you’re over age 70½ and haven’t taken the required minimum distribution from your IRA this year, there’s still time to make a charitable gift and save income taxes.  The owner of an IRA can direct the custodian to send a check — up to $100,000 annually — to charity, without paying the income tax that’s normally due whenever funds are withdrawn from the account.  And while there is no charitable deduction for an IRA gift, there may be tax savings if the gift takes the place of required distributions.  For example, Bob is required to take $50,000 from his IRA this year, even though he doesn’t need the funds.  In his 28% tax bracket, he will owe $14,000 in income tax.  But if he instead tells the custodian to make a $10,000 gift directly to charity, that amount satisfies part of the required minimum distribution and reduces his tax by $2,800.  Bob’s gift must be made to a public charity, not to a donor advised fund, private foundation or to arrange a life-income gift such as a charitable gift annuity.

Even if you’ve already taken your required distribution for 2017, you may find it satisfying to make charitable gifts from your IRA.  It can help reduce the size of the account, which can result in lower required distributions in future years.


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