The Smarter Giving Guy » IRAs

Tips for your year-end giving

SG Guy — Sun, 13 Nov 2011 19:25:17 +0000

Giving to fewer charities can result in more of your money going to programs you care about. Read more about this, tax-free IRA donations, avoiding scams and other year-end giving tips.

Tax-free IRA donations revived

SG Guy — Tue, 21 Dec 2010 22:58:49 +0000

The compromise tax package just passed by Congress brings back for 2010 and 2011 the ability to donate tax-free from an individual retirement account. And, reflecting the end-of-year nature of the Congressional action, the 2010 donation can be made as late as January 31, 2011. (See section 725 of H.R. 4853).

If you are 70½ or older you can donate from your IRA directly to the qualified organization of your choice – tax-free! The tax package rule applies to the 2010 and 2011 tax years, and allows you to give up to $100,000 each year. You could call this rule the “Grin and Give Rule.”

Normally, when you take money out of your IRA, that money is taxable income to you. That’s fine, you say, you’ll just turn around and spend the money on your mortgage or give it to a charity — and get an offsetting deduction. But you might not get all or part of that deduction if, for example, you use the standard deduction or you itemize and your deductions get caught up in the phase-out rules.

Under the Grin and Give Rule, the money taken from the IRA is not taxable income to you. And you don’t have to worry about whether you use the standard deduction, itemize or face other deduction limits. Actually, if you were going to make a charitable deduction anyway, using the Grin and Give Rule could help you protect your other itemized deductions, and even save taxes on your social security. And, of course, the charity doesn’t have to pay any tax either.

Cautions: Don’t give away money you may need. The gift must be made directly from your IRA trustee to the charity. Be sure to obtain a written receipt from the charity to substantiate your donation. The Rule applies to many charities, but not all. At this moment, this is a Federal income tax law; check whether the your state’s income tax laws have been conformed to include the extension. Consult your tax advisor.

Bill extending tax-free IRA donations moves forward

SG Guy — Tue, 01 Jun 2010 21:03:07 +0000

The U.S. House of Representatives has moved forward H.R. 4123 – now know as the “American Jobs and Closing Tax Loopholes Act of 2010″ – which includes an extension to the end of 2010 of the Internal Revenue Code rule permitting IRA owners to make tax-free donations directly to charities.

Read our description of the rule that was in effect through December 31, 2009.

Read the current legislation (through May 28, 2010).

Eight tips for 2009 year-end giving

SG Guy — Fri, 18 Dec 2009 23:18:01 +0000

It’s a terrific time to be generous. With demand for charity services up, and donations to charity down, charities need our support now.
Stick with your budget. Philanthropy is wonderful, but first make sure to take care of yourself and those who depend on you.
Focus your giving on causes you care about. Don’t give to everyone.
Research before you give. Many charities do strong work with the moneys entrusted to them. Others, unfortunately, do not. Spend no less than 30 minutes screening a charity before you give. Look at the percentage of spending that goes to programs, review their cash reserves, check their spending on staffing, see how much they spend to raise a dollar. For more tips.
Select fewer charities. Not only does this help you stick with your giving focus, it means you can make better use of your research time. Let’s say you’d spend at least 30 minutes screening a charity. Give to eight, and you’ll spend four hours. Focus on two or three, and you can research more deeply, get to know each of them better, and still save time.
Selecting fewer charities can also mean more of your dollars go to charity programs. Let’s say you’d give $25 to each of eight charities. If the average charity spends $10 to process a gift it receives, $80 (or 40%) of the $200 you’d give goes to processing costs. If you instead give $100 to each of two charities, only $20 (or 10%) goes to processing costs. That means $60 (30%) more available for programs.
Scammers increase their efforts when they see people are feeling generous. The holiday season is one of those times. Every dollar scam “charities” take in is a dollar that could instead have gone to a strong charity.
Give to charities directly from your IRA (if you are at least age 70 ½). You’ll do good, and do it totally tax-free. A key benefit of an IRA is putting off income taxes on work earning. But, eventually, those work earnings (and what they’ve earned within your IRA) are hit with income taxes when you or your heirs withdraw. Until December 31, 2009, you can give directly to a charity totally tax- free. Learn more about tax-free IRA donations.

Many people do much of their charitable giving at year-end. All of the above tips (except #8) are also good advice year-round. Happy giving!

Tax-free IRA donation rule expires December 31, 2009

SG Guy — Sun, 01 Nov 2009 23:07:29 +0000

Interested in donating to a charity before year-end? Have money in your IRA that you can give? Until December 31, 2009, you can donate to that charity directly from your IRA totally tax-free!

Come January 1, this rule is gone.

Read the details.

IRAs and Other Retirement Plans Often Smart Choices for Donating

SG Guy — Sat, 21 Mar 2009 18:24:28 +0000

When choosing which assets to leave to which heirs, think of charities first for IRAs and other retirement plans. No one will benefit more as a beneficiary of your retirement plan than a charity (make sure it’s a Qualified Organization):

Charity beneficiaries don’t pay income taxes on IRA or other retirement plan distributions.
Individual beneficiaries do pay income taxes on those distributions.

Donate Tax-Free from Your IRA

SG Guy — Sun, 08 Mar 2009 21:05:06 +0000

If you are 70½ or older you can donate from your IRA directly to the qualified organization of your choice – tax-free! This special rule, originally passed by Congress in 2006, was extended in October 2008 (§205 of H.R. 1424, the Emergency Economic Stabilization Act of 2008). The extension applies to the 2008 and 2009 tax years, and allows you to give up to $100,000 each year. You could call this rule the “Grin and Give Rule.”

Cautions: Don’t give away money you may need. The gift must be made directly from your IRA trustee to the charity. Be sure to obtain a written receipt from the charity to substantiate your donation. The Rule applies many charities, but not all. At this moment, this is a Federal income tax law; check whether the California income tax laws have been conformed to include the extension.