Certain older taxpayers may be able to benefit from a unique tax break.

Transfer funds directly from an IRA to an IRS-approved charity. Although the charitable contribution isn’t deductible, the distribution from the IRA isn’t taxable. And the payout qualifies as a required minimum distribution (RMD).

This strategy is only available to taxpayers over age 70 ½ . Congress threatened to remove this tax break as part of the Tax Cuts and Jobs Act (TCJA). But, ultimately, the new law didn’t touch it.

If you have both a traditional IRA and a Roth IRA, it generally makes sense to use the traditional IRA first for qualified charitable distributions.

Small Business Tax Strategies
July 2021