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The Suburbanite
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IRA owners over the age of 70 ½ can give Money to Charity Tax Free!
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By Dee Siegferth
When it comes to financial and estate planning, Dee believes the entire process revolves around the person and their specific situation. She believes that it is important to develop the right investment, retirement, insurance, asset protection and ...
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When it comes to financial and estate planning, Dee believes the entire process revolves around the person and their specific situation. She believes that it is important to develop the right investment, retirement, insurance, asset protection and estate plan for each individual client.
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Dec. 12, 2013 12:01 a.m.

IRA Expert and CPA, Ed Slott stated in his latest Slott Report--any IRA owner who is over the age of 70 ½ must take their required minimum distribution (RMD) by Dec. 31, 2013.

If you want to save money on this taxable event and you would like to donate to your favorite charity this year, you may want to consider giving your RMD directly to the charity. A provision in the tax code known as Qualified Charitable Distributions (QCDs) allows you to give your IRA distribution directly to charity and save taxes.

Here’s how it works. Normally, any IRA distribution, including your RMD, is taxable to you, but QCDs are tax-free as long as certain rules are followed.

(1) Under the IRA QCD rules, if you are actually age 70 ½ or older on the date of the distribution, you can give your RMD or any amount up to $100,000 to a qualifying charity. The IRA funds must be transferred directly to the charity.

(2)  The charitable donation from your IRA can satisfy your RMD for the year.

The reason why you likely will save taxes using a QCD is because it’s a tax-free distribution. It won’t increase your adjusted gross income (AGI) and won’t affect items on your federal income tax return that are negatively impacted by higher AGI, such as itemized deductions and personal exemptions.

Qualified Charitable Contributions apply to IRAs, Roth IRAs, and INACTIVE SEP and SIMPLE IRAs. They must come from pretax amounts only; this is an exception to the pro-rata rule. It does not apply to employer retirement plans such as a 401(k).

QCDs will expire at the end of 2013

Unless Congress reinstates or extends QCDs, they will expire on Dec. 31, 2013. Congress has reinstated QCDs over the past several years, so hopefully they’ll do so again.

But until that time, talk to your tax advisor before year-end to see if you should send your IRA RMD directly to a charity to save taxes.

Dee

dee@themilestonecenter.com

Source:   www.irahelp.com

Dee is a Charter Masters IRA Elite adviser with Ed Slott IRA Advisory Group. Securities offered through Wall Street Strategies, Inc. 362 N. Main Street Huron, OH 44839 (419) 433-5291 Member FINRA & SIPC

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