taxes

Don't Transfer IRA Distributions to Charity Yet

Congress hasn't reauthorized the law allowing people to give required minimum distributions from IRAs tax-free to charity but may by the end of the year.

Can I give the required minimum distribution from my IRA tax-free to charity in 2012, as the law allowed last year? I’m trying to decide when to take my RMD this year and I don’t want to miss the opportunity to make the tax-free transfer to charity again, if it’s available.

The law permitting people over age 70½ to make tax-free transfers of up to $100,000 from an IRA to charity hasn’t been passed for 2012 yet, but typically Congress reauthorizes the tax break close to the end of the year. If you’re interested in giving some of the money to charity, wait until closer to the end of the year to take at least that part of your RMD. With the reauthorized break, the withdrawal would count as your required minimum distribution but would not increase your adjusted gross income.

You only qualify for the tax break (assuming it’s approved) if you transfer the money from your IRA directly to charity, so if you take the cash out of your IRA now and give it to charity later, you won’t get the break. You could take a tax deduction for the donation instead if you itemize, but the withdrawal would be added to your adjusted gross income first. Keeping the withdrawal out of your adjusted gross income will help you stay below the income limit for other tax breaks and avoid the Medicare high-income surcharge. It can also reduce the taxes on your Social Security benefits.

For more information about RMDs, see Rules for Required IRA Distributions.

Most Popular

‘I Can’t Retire – I Need Health Insurance’
health insurance

‘I Can’t Retire – I Need Health Insurance’

Health insurance is seen as a huge hurdle for early retirees, but the answer to finding affordable coverage could be simpler than you think.
August 7, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The Inflation Reduction Act and Taxes: What You Should Know
Tax Breaks

The Inflation Reduction Act and Taxes: What You Should Know

The U.S. Senate has passed the Inflation Reduction Act of 2022—a climate, energy, healthcare, and tax bill that would increase IRS funding, and change…
August 8, 2022

Recommended

The Inflation Reduction Act and Taxes: What You Should Know
Tax Breaks

The Inflation Reduction Act and Taxes: What You Should Know

The U.S. Senate has passed the Inflation Reduction Act of 2022—a climate, energy, healthcare, and tax bill that would increase IRS funding, and change…
August 8, 2022
When Are 2022 Estimated Tax Payments Due?
tax deadline

When Are 2022 Estimated Tax Payments Due?

If you're self-employed or don't have taxes withheld from other sources of taxable income, it's up to you to periodically pay the IRS by making estima…
August 6, 2022
2022 Tax Calendar: Important Tax Due Dates and Deadlines
tax deadline

2022 Tax Calendar: Important Tax Due Dates and Deadlines

Know the tax deadlines that apply to you, so you don't get hit with IRS penalties or miss out on a valuable tax break.
August 5, 2022
Montana Storm and Flooding Victims Get More Time to Pay Taxes
Tax Breaks

Montana Storm and Flooding Victims Get More Time to Pay Taxes

Certain tax filing and payment deadlines are extended for residents and businesses impacted by the Montana severe storms and flooding that started in …
August 5, 2022