As of 2011, the Internal Revenue Service allows a taxpayer to gift money from his traditional IRA. Whether the IRS views the person’s gift as income taxable to the owner of the IRA depends on several factors, including the recipient of the gift. When determining if the amount a person gives is taxable, the IRS also considers the amount of the individual’s gift and the age at which the IRA owner makes a gift from his retirement account.
The IRS will not view a person’s gift from his traditional IRA as taxable income if he satisfies certain criteria at the time he gives his gift. The IRS will permit an IRA owner to exclude the amount of his gift, up to $100,000, from his taxable income if he is at least 70 ½ when he makes his gift, the trustee of his retirement account distributes the gift directly to a qualified charitable organization and the taxpayer receives proof of his donation from the organization that accepted the dispersed funds. If a person receives a good or service of more than a token value in exchange for his gift, the IRS will view the amount of his donation as taxable income collected by him.
Required Minimum Distribution
The IRS requires an owner of a traditional IRA to begin taking annual minimum distributions after he turns 70 ½, usually by April 1 of the year following the one in which the person reaches age 70 ½. If a person satisfies the donation criteria, the IRS views the amount he gifts from his IRA as part of his required minimum distribution for the year.
Qualified Charitable Organizations
The IRS typically requires an organization to submit an application to become qualified to receive tax-deductible gifts or donations from taxpayers. The IRS recognizes five types of qualified charitable organizations: community chests and foundations, fraternal organizations operating under the lodge system, U.S. veterans organizations, some nonprofit cemetery organizations and governmental organizations that perform meaningful functions within the boundaries of the United States, U.S. possessions or Puerto Rico, or on tribal land. In general, a qualified charitable organization attempts to achieve literary, scientific, educational, religious or charitable goals or to prevent the abuse of animals or children.
The IRS requires a taxpayer to provide proof of any gift he makes from his traditional IRA to a qualified charity in order to exclude the amount of the donation from his taxable income. In general, the IRS requires an IRA owner to obtain a written acknowledgement of his gift from the charity that accepted the contribution by the time he files his federal tax return for the year. The acknowledgement must state the amount of the person’s donation and whether he received anything from the charity as a result of his gift.
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