If you like giving to charity, you can do so by using your IRA if you are at least 70 1/2 years old. As you probably know, at this point you have to start taking required minimum distributions from your IRA. And, unfortunately, these distributions can count as taxable income. Instead, though, thanks to the Pension Protection Act of 2006, you are welcome to send charitable giving donations directly to a charity (up to $100,000). The money counts toward your required minimum distribution, and it does not count as taxable income. You can’t take a deduction, though. But most folks find that avoiding paying the taxes amounts to more than the deduction they would get.
Do the IRA charitable giving thing right
It is very important that you do not withdraw the money from your IRA for charitable giving in this case. Rather, you should contact whoever is in charge of your IRA management and let them know where you want the money sent. If a check comes to you inadvertantly, do not cash it. Rather, take it back to your custodian and ensure that he or she understands that you are looking to take advantage of the rules laid out in the Pension Protection Act.
Read the first part in the taxes and charitable giving series, addressing the basics of charitable giving and taxes.