Legal Blog

The Weekly Scenario: Charitable Contributions from an IRA

Question:  Is there a way to make charitable contributions directly from my IRA?


Answer: Yes, the Protecting Americans from Tax Hikes Act of 2015 that went into effect late that year, made something known as ‘qualified charitable distributions’ (or ‘QCDs’) a permanent fixture in the law.

Those IRA owners and IRA beneficiaries (for inherited IRA accounts) who are age 70 ½ or older can cause a QCD by directing IRA funds to be paid directly from the IRA to the charity. The QCD will count towards fulfillment of the year’s required minimum distribution or RMD. However, because the IRA owner will report no taxable income, no charitable deduction can be taken on that distribution.

As such, the QCD will allow the person to satisfy her RMD and at the same time, reduce her adjusted gross income (AGI) for the year. By keeping AGI down, this potentially allows for a greater possibility of taking advantage of other deductions.

Comment: QCDs may also be made from a Roth IRA, but there are probably better avenues to use here. QCDs are not permitted to be made from a donor advised fund or private foundation.

As always, if you have any questions or would like to learn more, please let me know.

ABOUT STEVE SHANE

 

Steve Shane Casual SmallSteve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

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