IRA Distribution to The Food Bank

By Hyman Darling
Bacon Wilson, P.C.

Hyman Darling

One of the most advantageous charitable opportunities is available for individuals who are 70½ or older who have an IRA. This involves the distribution from an IRA directly to The Food Bank up to $100,000.00 per donor per year.

Many individuals feel that writing a check or giving appreciated assets to a charity is beneficial, and these are absolutely good techniques, but a better one is the direct contribution from the IRA itself.

In this situation, a person would cause a distribution to be made to The Food Bank directly from the IRA custodian.  By doing so, the funds do not get listed on the income tax return as income, and also, the individual does not write them off as a charitable deduction.  This is beneficial in many ways.  The first would be for a person who doesn’t itemize their deductions but reports taxable income.  This has the effect of making the distribution without having to declare the income as taxable.

Also, if a person has taxable income and does itemize their deductions, this will reduce their taxable income which will have a positive effect on providing less gross income, which will allow more itemized deductions to be taken as many are limited based on income.  Of course, the person’s deductions will be reduced because they will not be reporting the charitable deduction.

Another benefit is that if a person is reporting income and has to pay income tax on a portion of their Social Security income, this will alleviate the need to have the income increased which could have a decrease in the amount of social security which is taxable.

Finally, the distribution from the IRA to The Food Bank satisfies the required minimum distribution so that for instance, if a person had a $15,000.00 required minimum distribution per year, if they allowed $15,000.00 to be distributed to The Food Bank, this would satisfy their distribution without having to report taxes on that amount.

Hopefully, this is the time of year where a person who has not taken the minimum distribution should consider satisfying all of their charitable contributions directly from their IRA or at least consulting with their financial advisor and accountant to determine what is most beneficial in making the decision.  This can also be repeated in January so that the distribution is made at the beginning of the year rather than the end of the year which may also satisfy any charitable pledges that have made.