If you are over 70 ½ years old, you can donate some or all of your IRA to an eligible special needs charity or non-profit of your choice. Using a Qualified Charitable Distribution, you can donate directly from your IRA to the charity. Not only is this a great way to support your favorite organizations serving individuals with special needs, there are also some substantial tax benefits from making donations directly from your IRA.
Unlike traditional donations, you do not have to claim the donation as income, but this also means you cannot claim it as an itemized deduction. The IRS would consider that double-dipping. This can be used to help keep your income levels at a certain desirable range for when you file taxes.
If you take the standard deduction on your tax return, this can be a valuable benefit. Since you take the standard deduction, you do not receive any benefit from making a donation to a charity. However, since the money donated does not count as income, you will not be penalized. Basically, if you want to make a charitable donation and take a standard deduction on your federal tax return, it would benefit you to make the donation from your IRA and not your other sources of income since you will have to pay taxes on the other sources of income.
Another benefit of making a charitable donation from an IRA is that it will count towards your required minimum distribution (RMD). Any distribution from your IRA would count as income on your tax return. If you do not need the money from your IRA for personal use, you could donate the RMD amount to an eligible special needs charity and not have to report it as income. This may also help you avoid moving into a higher tax bracket.
If you have an IRA and are considering donating to a special needs charity, contact our Manhattan Beach special needs and disability planning lawyers at (310) 782-6322 so that we can help you carefully review the options and select the best course of action.