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 $105,000 in a calendar year. $105,000 is a $5,000 increase effective in 2024. 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.

• So 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!

The maximum annual total using the rule is $105,000. And the gifts count against your required minimum distribution.

Reminder, you have to be dealing with a Qualified Organization (one that is eligible to accept tax-deductible charitable contributions). And not all otherwise Qualified Organizations are eligible (for example, donor-advised funds and supporting organizations are not).

More Details:

• The gift must be made directly from your IRA trustee to the charity.
• Be sure to obtain a written receipt from the charity to substantiate your donation.
• The Rule applies to many charities, but not all.
• This is a Federal income tax law; check whether the your state’s income tax laws have been conformed to include the rule.
• The rules get trickier is you contribute to your IRA during or after the year you turn 70 ½.
• Consult your tax advisor.
• Sexy as “tax-free” sounds, never give away money you may need.

More background for you

The IRS refers to these distributions as Qualified Charitable Distributions. Here’s a bit of what IRS Publication 590-B has to say. Note I’m quoting the 2023 version, where the amount shown is $100,000. Expect the 2024 version to show $105,000.

Qualified charitable distributions (QCDs). A QCD is generally a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions. You must be at least age 70 ½ when the distribution was made. Also, you must have the same type of acknowledgment of your contribution that you would need to claim a deduction for a charitable contribution. See Substantiation Requirements in Pub. 526.

The maximum annual exclusion for QCDs is $100,000. Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint return, your spouse can also have a QCD and exclude up to $100,000. The amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income.