IRA Charitable Rollover
The IRA Charitable Rollover provision allows individuals aged 70½ and older to donate up to $100,000 from their traditional or Roth IRAs to eligible public charities without having to count such qualified charitable distributions as taxable income. Distributions from IRAs, which are required starting at age 70½, are otherwise typically included in the individual’s adjusted gross income (AGI) and subject to income tax.
Excluded from the IRA charitable rollover provision are distributions to supporting organizations, donor-advised funds, or private foundations and distributions from SEP or SIMPLE IRAs.
Because the qualified charitable distributions aren’t counted in an individual’s AGI, the individual cannot claim an itemized charitable deduction for them. But lowering AGI is generally considered a more valuable tax benefit than the alternative of recognizing taxable income and taking a corresponding charitable deduction because:
- Medical expenses for seniors are limited to the excess over 10% of AGI
- Miscellaneous itemized deductions are limited to the excess over 2% of AGI
- Itemized deductions are generally reduced by 3% of AGI above a threshold
- Personal exemptions begin to phase out as AGI exceeds a threshold
- Up to 85% of Social Security income becomes taxable as AGI increases
- Eligibility for Roth IRA contribution goes away after AGI exceeds a threshold
- The 3.8% tax on net investment income only applies to AGI above a threshold.
Please consult your tax advisors before proceeding.