Save & Support

If you’re 70 ½ or older, you already know that you are required to take Required Minimum Distributions each year from your IRA or the IRS will make you wish you had!  One way to take your RMD’s is thru a charitable rollover, but not everyone is aware of the IRA charitable rollover as a tax benefit.  With a charitable rollover you:

• Avoid income taxes on transfers of up to $100,000 from your IRA to Southern Sun Farm Sanctuary

• Satisfy your required minimum distribution (RMD) for the year

• Reduce your taxable income, even if you do not itemize deductions

• Help the horses!

There are several types of donors who can benefit from the charitable rollover. Three of these apply to a wide number of donors. The first are the convenience donors who find it a very simple and easy method for an end of year gift. Second, a standard deduction donor benefits from a direct IRA rollover to a charity and not having it go thru their income tax return. Third, a Social Security recipient may reduce taxes with an IRA charitable rollover gift.

Convenient Gift - Some IRA owners delay taking RMD withdrawals until December each year. If an IRA owner is actively making regular gifts to charity during the year, then it may occur to them that this is a convenient way to make that gift and have it satisfy part of your RMD. You don’t write a check.  Convenience donors contact their IRA custodians to arrange for the IRA charitable rollover. The rollover goes directly to the charity. There is no charitable income tax deduction, but also there is no inclusion in federal taxable income. 

Standard Deduction Donor - Many seniors do not have a mortgage and their medical deductions are modest. They may not have a sufficient level of deductions to itemize and choose instead to use the standard deduction. If this donor withdraws $1,000 from his or her IRA and then gives it to charity, there is $1,000 of increased income with no offsetting charitable deduction, since the standard deduction is taken. Therefore, it is preferable for all donors taking a standard deduction to make IRA charitable rollover gifts directly to a charity and avoid additional income tax.

Social Security Donor - Social Security is generally subject to two levels of taxation. For donors who have income in excess of the first level, 50% of Social Security is taxed. For donors with income in excess of the second level, up to 85% of Social Security income is taxable. A withdrawal from a traditional IRA will potentially cause the recipient's annual income to increase from the 50% Social Security taxable bracket to the 85% Social Security taxable bracket. Even if the withdrawn amount is given to charity and deducted, there still is the higher level of tax on Social Security. By making a transfer directly to a charity, many Social Security recipients will stay in the 50% taxable group and save taxes.

Many of the charity advisory seminars, suggest that charities publish the above charity giving techniques for educational purposes. They stress that this information is readily available online, but many people just don't realize the benefits. This IS NOT tax advice. This is content for the public's edification. If this interests you, contact your tax adviser to see if it's right for your personal situation.