Using IRA rollovers for charitable giving

Thanksgiving is coming up, and the end of the year will be here before you know it. Now is a good time to start planning for your end-of-year giving/taxes!

Most people are aware of the tax benefits of an individual retirement account that allow you to use pre-tax dollars to save for retirement. The law requires individuals who are 70 1/2 or older to take a minimum distribution from their IRA, whether they need the income or not. An alternative for people who must take a withdrawal is to donate the distribution to charity, avoid income tax, and make a difference for local causes and organizations.

In this column on local philanthropy, I will illuminate some of the benefits and limitations of the charitable IRA rollover.

First, you need to know your required minimum distribution, which is based on your account balance and life expectancy. If you don’t withdraw enough, you’ll likely be assessed a penalty, which can be hefty. Once you determine your RMD, think about where you’d like your accumulated assets to go, and if you’d like to donate some or all of it to charity.

To help you decide, it’s important to understand the IRA charitable rollover allows Americans to give out of their IRA tax free! Donors can contribute up to $100,000 annually from IRA income if the funds are paid directly to a charity of their choice.

IRA rollovers cannot be made into a donor advised fund; however, they can be made into a designated field of interest, scholarship or unrestricted fund at the Eastern Colorado Community Fund or to a charity without having to pay current-year income taxes on the portion that is directly transferred.

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