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A Direct Transfer From Your IRA to Charity

A Direct Transfer From Your IRA to Charity

An Opportunity Not to be Missed for Some

After several years of 1 year only extensions, the Congress finally made permanent the ability to transfer all or part of an individual’s required minimum distribution (RMD) from their IRA directly to a qualified charity. There are 2 groups of individuals who can definitely benefit from this.

The first group are individuals/couples who do not normally itemize deductions. Since the direct transfer of all or part of the RMD to a charity is reflected on the first page of the IRA Form 1040 as a reduction in the income from a RMD, it essentially now acts like itemizing the same charitable deduction.

The second group are individuals/couples who do itemize deductions, but have fairly high incomes; “high” being defined as an adjusted gross income greater than $85,000 for a single filer and $170,000 for joint filers. Adjusted gross income is the amount on the last line of the first page of Form 1040. By using the direct IRA-to-charity transfer, reflected in a smaller RMD, this reduces adjusted gross income. Keeping adjusted gross income below $85,000 (single) or $170,000 (joint) saves having to pay a Medicare Part B surcharge premium every month. Obviously, this is not of benefit for persons younger than age 65.

Finally, for individuals/couples wishing to make large charitable gifts in a given year, generally the charitable gift itemized deduction is limited to 1/2 of your adjusted gross income. This limit can be exceeded somewhat by using the direct IRA-to-charity transfer, in addition to itemizing other charitable gifts (the same transfer gift cannot be “double-deducted, however).

If any of these situations seems to be of value to you, be sure to consult a tax professional first.

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    St. David's Foundation
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  • United Way
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    city GT
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