The month of December is well known as a time of year when philanthropic minded Americans give to charity. Thanks to the passage of the Tax Prevention Act of 2014 on December 19th , donors who have IRAs have a reason for a Christmas celebration. The passage of the law extends the qualified charitable IRA distribution law through the end of 2014. It is retroactive to January 1, 2014.
This law makes it much easier for tax savvy donors to make gifts from their IRA. A gift of this kind will also qualify for the donor’s minimum distribution amount. When you make a gift from you IRA in this manner you do not have to include the amount distributed in your taxable income.
For donors to qualify there are specific requirement that must be met:
- The IRA owner must be at least 70.5 years old.
- The gift can not exceed $100,000 per person
- Must be to a qualified public charity (This excludes donor advised funds, private foundations and supporting organizations)
Time is of the essence to take advantage of this giving opportunity. The law has been made retroactive to January 1, 2014. However, IRA holders who are just now considering this type of donation will need to work with their financial planner quickly to complete the donation before the end of 2014.
Another option for tax savvy donors to consider is the donation of appreciated stock. The DOW has hit multiple highs this year and at the time of this writing is with in 100 points of 18,000. If you are holding a stock that has appreciated in value, you can donate the stock to a charitable organization at its fair market value. If you had sold the stock and then made a gift from the proceeds you would have to pay a capital gains tax. However, by gifting the stock directly to the charity, you can avoid the capital gain and get the full benefit of the charitable donation.
Qualified charitable donations from an IRA or the donation of appreciated stock are great ways to help the organizations that are dear to your heart in a tax friendly manner. Additionally, it could help you and your family give more to charity than if you were simply donating cash. As with any financial decision, it is important to speak with your financial advisor, estate planning attorney or accountant before making your gift.
Written by Hugh Nystrom, Director of Development and Community Relations for Childhelp’s Tennessee Programs.