Update: Making Charitable Donations Directly from Your IRA

Over the past few years, several of our clients, who are in Required Minimum Distribution mode (over age 70 ½), have taken advantage of a now expired tax provision to make charitable donations directly from their IRAs.

In late May, the U.S. House of Representatives' top tax committee approved a proposal that would make permanent a tax deduction for charitable contributions from individual retirement accounts (IRAs).

Under the proposed bill, taxpayers age 70½ and older could make charitable contributions of up to $100,000 from their IRAs and Roth IRAs without having to treat the money as taxable income. Such a provision was extended for 2012 and 2013 in the fiscal cliff bill that Congress passed in January 2013. As of the end of last year, it had expired for 2014.

It is uncertain if Congress and the President will approve this provision, as it may be bundled with other “tax extenders,” and the Obama administration seems to be reluctant to permanently extend tax breaks — as the piecemeal House bill would do — without having them paid for by cuts elsewhere in the budget.

At this time for clients with IRAs who are in RMD mode and considering charitable contributions for 2014, we would recommend potentially delaying your donation until later in the year to see if this bill is passed.

We will let you know if/when the bill is signed into law. In the interim, if you have questions about this proposed tax change, please give us a call.

RJFS does not provide tax advice. You should discuss any tax or legal matters with the appropriate professional.