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Charitable contributions from IRAs

E-mail|Link Posted by Jill Boynton October 26, 2009 10:11 AM

If you are considering making charitable contributions before the year ends, you may be able to use IRA money. The IRS allows individuals over age 70 1/2 (those subject to the Required Minimum Distribution rules) to transfer money directly from an IRA to an eligible charitable institution. However there are some rules to be aware of:

1. The money must transfer directly to the charitable organization
2. Distributions from SIMPLE-IRAs and SEP-IRAs are not allowed
3. No deduction is allowed on your tax return for the contribution, since it came from pre-tax money (non-deductible contributions are eligible for a charitable deduction)
4. Not all charities qualify – donor-advised funds are not eligible recipients
5. The maximum amount that can be transferred is $100,000.

This option is available only through 2009. This is an appealing strategy for those who don’t itemize deductions and therefore cannot take advantage of the charitable deduction. Also if you normally take money out of your IRA for living expenses, which include charitable deductions, you can reduce the amount of your taxable income.

For more information see IRS Publication 590 or consult your tax accountant.

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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.