Will Congress Let You Donate IRA Withdrawals Tax Free?

By Christina T. Vidoli

Until this year, individuals over 70 ½ could give a portion of their required IRA withdrawal to charity without paying tax on the withdrawal (even if they didn’t itemize their deductions). Unfortunately, the rule that allowed this to occur, known as the “individual-retirement-account donation” expired at the end of 2011 and has yet to be restored by Congress.

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This rule allowed IRA owners to contribute up to $100,000 of IRA assets directly to a tax-free charities.  While such donations were not tax-deductible, they also did not count as income that could trigger higher taxes.  An article in  The Wall Street Journal explains that under the current rules, the money that is withdrawn out of an IRA counts as the required withdrawal, regardless if it is then donated to charity. 

Those who don’t itemize should wait until the end of the year to take their required IRA distributions and making their charitable gifts to see if Congress passes legislation reinstating the favorable treatment of direct IRA gifts.  Or talk to a trusted advisor.  There’s usually more than one way to accomplish your goals. 



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