Getting the Biggest “Bang” for Your Buck

March 31, 2017

Lake1Avoid Tax on Your IRA Distributions

This past December, several Hume friends took advantage of a law that allows you to avoid taxation of your IRA distributions when given to a charity. This provision, called the “IRA Charitable Rollover,” allows you to avoid the income tax while making available up to 100% of those IRA distributions to the charity. Here is how it works and how it might be of benefit to you or a parent.

Individuals age 70½ and older are allowed to donate up to $100,000 in IRA assets to a charitable organization tax-free and excluded from their adjusted gross income. These gifts could come from all or part of your required minimum distribution that you must take after reaching 70½. The benefit is that these gifts to charity will not only be income tax-free, but the actual gift to charity will be larger than if you gave the distribution after paying tax.

Here is an example: Say you normally give $5,000 a year to Hume Lake. You are over 70½ and are receiving distributions from your IRA. If you direct your IRA administrator to send $5,000 of your distributions directly to Hume Lake, you would save $750 in income taxes while making the same gift you normally do (assuming a 15% tax bracket). The tradeoff is that you can’t avoid the income tax and also get the income tax deduction.

This could make a lot of sense if you are already planning on making gifts and you also are receiving IRA distributions. There are some other requirements that I can go over with you if you should have any questions. If I can help you create a plan to save taxes while supporting Hume, I would love to hear from you.


David M. Harrison, J.D.
Director of Gift & Estate Planning
(559) 305-7611