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IRA Distribution

IRA Distribution

Georgetown Palace Theatre on stage performance. Georgetown Palace Theatre on stage performance.

Are you 70 ½ years old or older?

A recently reinstated law allows you to give up to $100,000 from your IRA directly to a qualified charity such as The Georgetown Palace Theatre without having to pay income taxes on the money.

The key points regarding these tax-free IRA charitable distributions include:

1. Donors must have attained age 70 ½ or older at the time the IRA distribution is made to the Georgetown Palace Theatre.

2. The distributions must be made directly from the IRA custodian to the Georgetown Palace Theatre.

Steps to take now:

  • The IRA owner directs the IRA custodian as to the distribution time and amount to be made to the Georgetown Palace Theatre.
  • The amounts distributed from an IRA as qualified charitable distributions are excluded from the AGI (Adjusted Gross Income) of the taxpayer.
  • An individual taxpayer may make tax-free IRA distributions of any amount up to a total of $100,000.
  • A spouse may also give up to $100,000 from his or her IRA.
  • The distributions may be made at any time throughout the remainder of the year and to as many charities as desired as long as the total has not exceeded $100,000 per year.

All IRA owners over age 70 ½ are forced to take required minimum distributions.

The good news is that qualified charitable IRA distributions are counted up to the $100,000 maximum to satisfy the annual required minimum distribution.

The qualified charitable distributions may be made from traditional IRAs but not from SEP IRAs or SIMPLE IRAs. However, taxpayers can convert a SEP or SIMPLE IRA to a traditional IRA and then make a qualifying tax-free distribution.

The donor will not receive a double tax benefit when making tax-free IRA distributions to qualified charities. That is, because the charitable distribution from an IRA is excluded from the taxpayer’s AGI, a deduction as a charitable contribution from income is not also allowed. The Georgetown Palace Theatre in receipt of a qualifying charitable distribution from an IRA will provide a “contemporaneous written acknowledgement” or the taxpayer will risk losing the tax-free treatment.

Using IRA funds as charitable gifts may be very tax-wise

There are a number of reasons including, but not limited to, these advantages:

*Be sure to check with your tax professional for more information

  • Qualified charitable IRA distributions are not included in gross income and will not cause the taxpayer’s AGI to increase.
  • Taxpayers whose itemized charitable gift deduction is limited by the 50 percent AGI limit may still make tax-free IRA distributions to charities up to the $100,000 annual limit.
  • Taxpayers who do not normally itemize their deductions will benefit from IRA tax-free charitable distributions since they are not included in AGI. Effectively non-itemizers get the benefit of a charitable contribution that they would not have received if they had simply made a contribution directly to a charity.
  • Taxpayers who wish to support the Georgetown Palace Theatre can leverage their gifts by making them tax-free from their IRA accounts. The untaxed dollars in IRA accounts become the best currency to make charitable contributions since the dollars are not diminished by income taxes.

Why gift to the Georgetown Palace Theatre?

The Palace is a 501 (c) 3 non-profit organization dedicated to enhancing the quality of life in Georgetown and Williamson County by providing a venue for quality and affordable entertainment and educational opportunities in the performing arts. As a qualified charity a gift to the Georgetown Palace Theatre will satisfy the charitable deduction requirement of the IRA withdrawal.

The Georgetown Palace Theatre does not give tax advice and all such distributions should be made after consulting a tax professional.