Health & Fitness
Tax Free Withdrawals From an IRA?
Tax-free Required Minimum Distributions from an IRA to a qualifed charity for seniors available through December 2011.
The IRS has some good news for senior citizens, at least for those 70½ and taking your Required Minimum Distributions (RMD).
One of the many provisions included in the Pension Protection Act of 2006 is a section that allows seniors to withdrawal up to $100,000 from their IRAs, tax free, and donate it to a qualified charity. This provision was to expire at the end of 2009; however, our senior-friendly government extended it through 2011.
Now one might ask, if I have to donate the distribution to a charity, how does this benefit me?
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A few highlights of donating through the Pension Protection Act provisions are:
- You are donating pre-tax dollars rather than after tax dollars like you would if you wrote the check,
- It allows you to make the contribution, even if you don’t itemize on your tax return,
- It is not subject to the normal limitations related to income, and
- Doesn’t affect taxability of Social Security benefits.
Not to mention the financial benefit to the charity and the satisfaction of knowing that you are contributing to a worthy cause while effectively lowering your tax bill.
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Of course there are guidelines that have to be met, the IRS never makes anything easy.
- You must be 70 ½ and taking RMDs from a traditional, rollover, or Roth IRA only. NO SEPs, or Simple IRA;
- The maximum distribution to qualify is $100,000;
- It must go to a qualified charity. No private foundations or donor-advised funds. For more information on qualified charities take a look at IRS Publication 78; and
- The IRA trustee or custodian MUST make the distribution directly to the charity.
It’s important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to work closely with your financial advisor or tax consultant to determine whether this tax provision is right for you.
If you have specific questions, please let me know. I can be reached at 813-269-0732 or mike@beacon-online.com.
Michael LaVoy, ChFC, CFP®
Beacon Asset Management, Inc.
16514 North Dale Mabry Highway