For many people end-of-year tax planning is a regular part of their lives. Given the com-plications that our tax system can engender, it is no wonder that taxes often impact personal goals and desires, especially during the holiday season when families are focused on relationships and gift giving.
However, it is possible to use tax-favored strategies to make your holiday charitable giving go further. For example, if you are over age 70½, the federal government permits you to rollover up to $100,000 from your IRA to charity without increasing your taxable income or paying any additional tax. These tax-free rollover gifts could be $1,000, $10,000 or any amount up to $100,000 this year. The gift satisfies your required minimum distribution (RMD) for this year without adding any taxable income to your bottom line, and since most IRAs are funded with pretax dollars, such gifts are a smart way to give to charity.
IRA Rollover: Simple, Easy Gift
Consider this example. Grace was a registered nurse and a frequent charity volunteer. During her working years, Grace’s IRA had grown substantially. Since Grace’s income meets her needs, she decided to make a gift of $2,000 from her IRA. Grace called her custodian and requested a transfer of $2,000. It was easy for Grace to make her charitable gift and she liked the fact that she could help without increasing her taxes.
Major IRA Gift: Smart Giving
Perhaps you are considering your tax planning goals and would like to make a major gift to charity. Like many individuals, your IRA may be the largest asset in your estate. Your CPA may be looking for ways to save taxes. By making an IRA charitable rollover gift of up to $100,000, you can reach your goal of helping charity in a significant way and reducing taxable income by using an asset that may otherwise be taxed at high ordinary tax rates.
Future IRA Gift Options: Helping Your Family and a Charity You Support
While you have the opportunity to give through your IRA now, there are other options available for making future gifts from your individual retirement account to charity:
Bequest of IRA: One option is to designate a charity as the beneficiary of your IRA. This permits you to continue to take withdrawals from your IRA during life and then leave the remaining value of your IRA to support a worthy program that is important to you.
Testamentary IRA Gift Annuity: Another option is to make a future gift of your IRA to charity while providing life income to your heirs. Your family will receive fixed payments based on your age at rates that can be as high as 9.5%.
Testamentary IRA Unitrust: An IRA could also be transferred to a special “Give It Twice” trust that usually provides income to children for a period of up to 20 years. After that time, the trust may pass to charity, creating a wonderful way for you to make a charitable gift.
This holiday season if you would like to discuss charitable giving options available to you, please contact Jeffrey Sisemoore, JD, Director of Planned Giving and Major Gifts at the National Kidney Foundation of Hawai‘i at 589-5976 or visit www.kidneyhi.org.