Published: Вт, Марта 28, 2017
World | By Tasha Manning

Use your IRA plan for donations and save

Use your IRA plan for donations and save

Of course, many retirees need the money they have in the IRA for living expenses. But if you do not need it, say retirement experts, you can get significant tax benefits by making a charitable donation with the assets coming from your IRA. This strategy, they say, is worth even if you only contribute about $ 1,000 a year to charities.

Here's what you need to know about it.

Advantages of Donations from an IRA

Please note that you get tax benefits when making donations in this way only if the distributions come from a traditional IRA, for which other withdrawals are taxable . (Roth IRA withdrawals are almost always tax-free for retirees.)

Distributing a traditional IRA to a charity is not considered as income on tax returns. Therefore, your adjusted gross income does not increase as you would if you make a normal withdrawal, says Jamie Hopkins, co-director of the retirement income program at the American College of Financial Services in Bryn Mawr, Pa.

That means you could keep some of your Social Security benefits from being taxed, says Hopkins. In some situations, he says, it can also help higher-income households not have to pay a Medicare tax of 3.8% on investment earnings.

In addition, taxpayers may qualify for a A series of deductions, credits or additional benefits for which they would not be eligible if their income was higher. For example, make a distribution to a charity of your IRA - and thus have a lower income Adjusted gross - can reduce your Medicare Part B and D premiums.

Another significant benefit of making donations in this way: charitable distributions count towards the minimum required distribution that every year of your traditional IRA should be made by older investors after they turn 70 ½.

"This is good if retirees do not need the minimal distribution required for their expenses or as savings for future expenses, and have intentions to make donations," says Judith Ward, senior financial planner and vice president of T. Rowe Price Investment Services in Baltimore. "To retirees who have to make the required minimum distribution but do not need it, they do not like having to pay taxes on that money."

How to make a charitable distribution from your IRA < What should you do if you are able to make a charitable donation and qualify as part of your required minimum distribution?

Start by carefully selecting the group or groups Nonprofit organizations that you want to support. (Distributions of IRAs that are donated to private foundations or donor-advised funds are not eligible in this case.)

More on Taxes "Starting now, instead of waiting until the last minute in December to make your IRA minimum withdrawal, it gives you time to investigate how organizations would use your donation," advises US Bank's Penfield.

Читайте также: La Liga: FC Barcelona vs Rayo Vallecano: Match Preview - Barca Blaugranes

By Luck, he says, it is not at all complicated to process a qualified distribution of beneficence from your traditional IRA.

"You simply communicate with your IRA trustee and ask you to make the donation directly to the charity Approved by the IRS. It really is that simple, "he says.

Avoid these mistakes

To begin, it matters when they are made.

For most people, donated distributions must leave their IRA no later than December 31, 2016 to be considered a qualified distribution of Benefit for 2016.

The exception: if you turn 70 years this year, you have until April 1, 2017 to make your first required distribution. Subsequently, distributions must be made before December 31.

There are also specific age requirements.

A qualified charitable distribution can be made from an IRA only if you are 70½ years old Or more at the time of distribution. In other words, you can not get a tax exemption for a distribution made before you reached 70½, even if you were to meet them later during that calendar year.

In addition, the check should not be sent to you To you, but to the charitable organization. "That's the biggest difficulty you can stumble over," says Hopkins of the American College of Financial Services. "If you receive a check from your IRA and then at the same time send another check to the charity, you will not get the same tax treatment. The IRA check must be payable to an approved charity. "

Finally, you can not receive any personal benefit in exchange for your gift.

Suppose you want to donate to a University or athletic foundation. That is fine, and donations of IRAs payable directly to these types of institutions may qualify for this tax exemption. "But this can not be a gift to be rewarded with special tickets, seating or entertainment," says Penfield. "There can not be any special treatment, something that is often forgotten to donors who might otherwise be giving away and hoping to gain certain advantages."

"Part of the estate planning process is to try to minimize the taxes that are owed, so assets contribute to many charities," says Penfield. And now, thanks to this congressional legislation, he says, "Not only can you see that your donation is used for good purposes while you are alive, but you will also get much better tax results."

Lynnette Khalfani-Cox, The Money Coach (R), is an expert in personal finance, radio and television personality, and a regular AARP collaborator. You can follow it on Twitter and Facebook.

При любом использовании материалов сайта и дочерних проектов, гиперссылка на обязательна.
«» 2007 - 2017 Copyright.
Автоматизированное извлечение информации сайта запрещено.

Код для вставки в блог

Like this: