A few weeks ago, we encouraged you to keep an eye out to see if Congress approves the tax extender allowing tax-free distributions from individual retirement accounts to charitable organizations. Congress not only approved it for 2015, but has made this tax provision permanent going forward.
Your IRA distributions can cause you to be placed in a higher tax bracket, have greater tax on your Medicare premiums and can increase tax on your Social Security benefits. If you are drawing money from your IRAs, this tax provision may be a great way to save money.
With this new law, as long as it moves directly from your IRA to a charity, you do not have to report this as taxable income. In addition, if you are age 70 ½ or older, you can directly transfer your Required Minimum Distributions (RMDs) to a Qualified Charitable Donation (QCD) of up to $100,000 annually from your individual retirement accounts. This amount can then be excluded from your gross income while satisfying your RMDs at the same time.