The blessing of being over 70 – Your church and charitable donations can be tax free!!

As I move closer to social security and Medicare age I try to focus on the glass being half-full. Seasoned
citizens are often reminded of an accumulation of aches and pains and the doctor’s visits that can fill up
a calendar. But offsetting those bummers can be the joy of grandkids, the beauty of our region and . . .
gifting to a charity directly from your IRA when you are over 70 ½.

If you are years younger than age 70, move along since you’ll have to wait a while to get this benefit. If
you are approaching your seventies, or older, then read on.

Our federal tax system has been greatly simplified over the last several years. In general this is a
wonderful thing, but for some people it has removed the tax benefits of charitable giving. Years ago
many people itemized charitable giving and other items on their tax return. Now with higher standard
deductions, only about 30% of people itemize their deductions. In some cases this has led people with
charitable intent to limit the amount they give to church or other charities.

One of the few tools remaining in our charitable giving tool-belt is for those over age 70 ½ , with an IRA,
who don’t itemize deductions. These lucky people can make donations directly from their IRA to a
charity without paying tax on the distribution. (i.e. The IRA dollars that eventually have to be distributed
and taxed can be paid to a charity tax free!). Most IRA sponsors / custodians have forms or specific
checkbooks to make direct gifting easy.

Here’s a couple simple examples:
Scenario #1: over age 70 ½, 25% federal and state income tax level and a $3,000 donation
o If the funds go from your IRA to your bank and then the church . . .
Then. . . $3,000 IRA withdrawal – 25% tax = Only $2,250 is available for the church
o If the funds go direct from your IRA to the church . . .
Then. . .$3,000 IRA withdrawal – 0% tax = The full $3,000 is available for the church
This is an “extra” $750 than can be used to fund the church!

Scenario #2: over age 70 ½, 25% federal and state income tax level and a $30,000 donation
o If the funds go from your IRA to your bank and then the church . . .
Then. . .$30,000 IRA withdrawal – 25% tax = Only $22,250 is available for the church
o If the funds go direct from your IRA to the church . . .
Then. . .$30,000 IRA withdrawal – 0% tax = The full $30,000 is available for the church
This is an “extra” $7,500 than can be used to fund the church!
Note: You need to track your direct IRA to charity distributions annually so you can fill out your tax forms properly.

Bottom Line – most people over age 70 ½ with charitable intent and an IRA should be making their
donations directly from their IRA to a charity. Our church needs your financial support to keep the lights on, pay staff,
serve the community and model love. If you are able, donating from your IRA can leverage your support!

About the author: Jay Berger, CFP® is a church member and has been a financial advisor for over 25 years. He’s been quoted in the Walls Street Journal, Money Magazine and the Detroit Free Press. He’s got lots of experience but he is still learning new things all the time.