Give and Grin. If you are age 70½ (70.5) or older you can donate from your IRA directly to the qualified organization (see below) of your choice — tax-free! This special IRA donation rule allows you to give up to $100,000 in a calendar year. We call this the “Grin and Give Rule.”
Normally, when you take money out of your IRA, that money is taxable income to you. That’s fine, you say, you’ll just turn around and spend the money on your mortgage or give it to a charity — and get an offsetting deduction. But you might not get all or part of that deduction if, for example, you use the standard deduction or you itemize and your deductions get caught up in the phase-out rules.
Under the Grin and Give Rule, the money taken from the IRA is not taxable income to you.
- And you don’t have to worry about whether you use the standard deduction, itemize or face other deduction limits.
- Actually, if you were going to make a charitable deduction anyway, using the Grin and Give Rule could help you protect your other itemized deductions, and even save taxes on your social security.
- And, of course, the charity doesn’t have to pay any tax either.
In other words, turning your IRA distribution into an IRA donation makes your IRA distribution tax-free! More . . .