Consider donating IRA distributions

    Most people are aware of the tax benefits of an individual retirement account. You can put money away for retirement while avoiding some of the taxes now or later. The law requires individuals who are 70 and a half or older to take a minimum distribution from their IRA, whether they need the income or not.
     An alternative for people in this age range is to donate the distribution to charity, avoid income tax and make a difference for local causes and organizations. In this month’s column on local philanthropy I will illuminate some of the benefits and limitations of the charitable IRA rollover, starting with some background.
     The Pension Protection Act of 2006 permitted individuals to roll over up to $100,000 from an IRA directly to a qualifying charity without paying income tax. The initial provision expired on Dec. 31, 2007, however Congress extended the provision year after year. Finally, the PATH Act of 2015 made this special provision permanent.
     In the past, if a person wished to donate a portion of their IRA to charity, he or she would have to take a distribution, pay current-year income taxes, gift the money to the charity and then claim the tax-deductible portion of the gift on their tax return. Now, up to $100,000 can be transferred from your IRA directly to a charity — including the Eastern Colorado Community Fund — without having to pay current-year income taxes on the portion that was transferred to charity. The rollover amount cannot be claimed as a charitable deduction and the action is considered “non-taxable event.”

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