Private Advisory Group

The return of Income Tax Breaks for Donations after 70 ½

Posted by Steve

The recent tax bill (enacted December 17th) had some good news for those age 70 ½ or older. A popular tax break for those who make charitable donations from their individual retirement accounts was resurrected. Under the new law, IRA owners who are 70 ½, can donate up to $100,000 per year from their account to one or more charities.

How donors benefit

Under the new law, which was first enacted in 2006, resurrected in 2008, and lapsed again in 2009, a donor receives no tax deduction for such charitable contributions, but they also don’t have to include the IRA withdrawal in their taxable income.

Essentially, that means the withdrawal will not inflate your taxable income. You can make donations from a SEP or SIMPLE IRA as well, provided no contributions were made into those accounts the same year as the gift was distributed.

Donate according to the rules

The rules further indicate that the donation should be issued directly to a public charity (we’ll talk about how to pick one in a minute). Private foundations, donor-advised funds, supporting organizations and charitable gift annuities do not count. The charity must also acknowledge the gift in writing.