Now is the time of year that we start to examine charitable giving with our clients. Many have been giving throughout the year, but a review is in order to make sure you have maximized the tax savings with the giving you want to do. One of the major ways you can maximize your giving is by donating directly out of your Traditional IRA.
If IRA owners are age 70½ they are able to donate money directly from their IRA’s to the charity of their choice, tax free. IRA owners can give up to $100,000 per year this way in order to maximize their giving potential.
There are a few considerations to take into account when looking at this method of giving. First and foremost, you may not give directly out of your traditional 401(k), it has to be an IRA. The second thing to consider is to make sure your tax professional is aware that you have donated in this manner. There is not a differentiating code on your 1099 that states that you gave your money to charity, it looks like a standard distribution that would be taxed. For this reason, make sure you inform your tax professional.
There are many good reasons to give money to churches or charities. We don’t like to give for the sole purpose of getting a tax break. However, if the tax breaks we get allow us to give more, then why not benefit as much as possible?
If you are interested in learning more about the tax advantages of charitable giving, give our office a call at 320-222-4236 to schedule a no-cost meeting.