Good news for donors looking to give from their IRAs: as a recent Wall Street Journal article pointed out, the mammoth tax bill just passed by Congress resurrects an expired provision allowing special charitable donations of IRA assets for taxpayers age 70½ and older. Additionally, since lawmakers allowed this benefit to expire in 2010, they included a special rule that allows you to make an IRA gift this month (January 2011) and count it for last year (2010).
Just as a refresher, if you are 70½ or older, you are eligible to use your individual retirement account (IRA) assets to make special charitable donations. In fact, you can contribute a total of $100,000 in IRA assets to one or more qualified charities, such as schools, churches, and public organizations — but not non-public or donor-advised funds and foundations.
The provision itself is simple, and the payout can satisfy your required minimum distribution. You don’t get a deduction, but neither do you have to report the payouts as income. Your donation bypasses tax calculations altogether.
One caveat: while IRA donations are easy, they may not be the most tax-efficient way for you to support your charitable causes. Since there is no deduction to take, a gift of appreciated assets now and a bequest of IRA assets at death could be the more tax-savvy approach. Be sure to consult qualified counsel, as each situation is different.