This time of year is a popular time to give back. Whether it is in time, gifts or cash, generous donors give what they can to make the holiday just as bright for others. In addition to traditional types of donations, if you are looking to make a hefty contribution to a nonprofit organization and you are eligible for IRA distributions, you might consider transferring your donation from an IRA directly to charity.
The December 2011 Kiplinger’s Retirement Report says this is one of the best ways to give directly to a charity, but you’ll have to act fast because this method might disappear at the end of 2011. The author, Elenor Laise, explains, “Until the end of December, people over age 70½ can transfer up to $100,000 from a traditional IRA directly to a charity. You won’t get a tax deduction for the charitable contribution, but you get something better: The money doesn’t show up in your taxable income in the first place, and the amount still counts toward your required minimum distribution.” It is important to remember that these types of donations should only come from Traditional IRAs, not Roth IRAs, since you already paid a large tax tab when you made contributions to the Roth or converted it to a Traditional IRA. Kiplinger advises, “If you want to make a charitable donation, take the money from a taxable account or transfer the money from a traditional IRA, if you have one.”
The article goes on to discuss donating shares instead of cash, as another alternative. Laise says, “For seniors holding highly appreciated securities in taxable accounts, it pays to consider donating those shares instead of cash. In addition to getting the deduction for the charitable gift, you avoid paying the capital gains tax – typically 15% – when you sell the shares.”
Of course, if you aren’t quite ready to make a large donation, any and all of what you can give is always appreciated by those organizations helping out the less fortunate during this holiday season and throughout the year.
