Charitable Gifts from your IRA? - Total Wealth Planning

Charitable Gifts from your IRA?

As you begin planning your charitable giving for 2018, keep one strategy in mind for those over 70 ½ and taking required minimum distributions.

Under the “Tax Increase Prevention Act of 2014” individuals are allowed to distribute up to $100,000 from an individual retirement account (IRA) directly to a qualifying charity without recognizing the IRA distribution as income.

How does it work?

A qualified charitable distribution is money that individuals who are 70 ½ or older direct from their traditional IRA to eligible charitable organizations. The cap is $100,000 per individual per year.  The IRA distribution is excluded from the individual’s income and therefore, cannot be taken as a charitable contribution deduction on their tax return.  Qualifying charitable distributions can be made to community foundations and most public charities, but not to donor advised funds.

Required minimum distribution (RMD)

Based on IRS laws, once an individual reaches age 70 ½ they are required to receive annual distributions from their traditional IRA based on life expectancy.  For purposes of RMD’s, qualified charitable distributions qualify as required minimum distributions.

 

Tax Planning Opportunities

Whether or not an individual takes advantage of this law should depend on their specific tax situation.  Personal income, itemized deductions, state of residence and many other factors will greatly impact the decision to give through IRA distributions or the more traditional way of gifting and taking a charitable tax deduction.

Proactive tax planning throughout the year is the key to reducing taxes over your lifetime and maximizing your after-tax dollars for wealth accumulation.  This is accomplished by applying changing tax laws to your specific situation.

Tax planning is complex and requires the guidance of a trusted and experienced advisor, such as a fee-only Certified Financial Planner™ (CFP®), who plans comprehensively, and with a complete understanding of your particular concerns and goals in life.

For more information please visit us at www.twpteam.com or contact Rob Lemmons, CFP®, CPA, AIF at 513-984-6696.

Rob Lemmons, CFP® is a principal and director of financial planning at Total Wealth Planning, a fee-only fiduciary financial planning firm in Cincinnati (Blue Ash), Ohio. With over 20 years of experience, Rob oversees every client’s financial planning experience from helping to protect their wealth, corporate benefits, retirement income, and overall wealth transfer strategies. As a CPA, CEPA, and CFP®, Rob is frequently invited to speak on financial planning and tax advisory topics and has been quoted in numerous industry publications including Yahoo finance and the Business Courier. Rob can be reached at rlemmons@twpteam.com.

Chris Allen, CFP® is a wealth advisor at Total Wealth Planning, a fee-only fiduciary financial planning firm in Cincinnati (Blue Ash), Ohio. Chris assists clients in creating a sound financial future while serving on the Firm’s Investment Policy Committee and technical financial planning team. Prior to joining the Firm in 2015, Chris worked as a Certified Financial Counselor with a non-profit financial counseling organization, where he consulted with numerous families and helped establish sustainable spending plans. Chris can be reached at callen@twpteam.com.

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