Charitable giving by individuals rose by 3.9% last year, to $228.9 billion, according to a recently published annual report by the Giving USA Foundation and the Indiana University Lilly Family School of Philanthropy. Total charitable giving reached $316.2 billion. That may sound like a lot, but it is off significantly from giving levels before the recent recession.
According to the report, it may take another six or seven years of growth at recent rates to get back to the support levels achieved in the peak year of 2007. Religious organizations received the largest share of gifts. The table below provides more details.
|Organization||Billions of Dollars|
A popular tax break was renewed for this year, one that has been dubbed the “charitable IRA rollover.” Those who are over age 70 ½ may want to consider the gift of a direct distribution from their IRAs. Up to $100,000 may be transferred to charity in this manner. Couples may transfer up to $200,000 if each partner has an IRA. In contrast to normal IRA distributions, amounts transferred directly to charity won’t be included in ordinary income (and so no charitable deduction is appropriate).
The definition of who is permitted to take advantage of this tax strategy dovetails perfectly with those who are required to take required minimum distributions (RMDs) from their IRAs. So some taxpayers simply opt to direct their required minimum IRA distributions to charity, because the distribution requirement will be satisfied, even though the amounts distributed don’t get taxed.
This tax break might be renewed again after this year, as has happened in the past, but in this era of major deficits and talk of tax reform, renewal is far from certain.
In some sense, the income tax exclusion for a transfer to charity from an IRA might not seem like such a big deal. After all, one always has been allowed to follow an IRA withdrawal by a charitable contribution and claim an income tax deduction. However, the full benefit of that deduction is not available to all taxpayers.
Accordingly, if you are 70 ½, you should consider a charitable gift from your IRA if:
As welcome as this tax planning opportunity is, every taxpayer’s situation is unique. See your tax advisor before taking any action.
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