How to donate from your IRA to your favorite charity, tax-free
Acts of true generosity are born out of the heart, but sometimes a change in the tax law can help make them a little bit easier to accomplish.
This past December, President Obama signed the Protect Americans from Tax Hikes (PATH) Act into law, allowing individuals over 70 ½ years of age to transfer up to $100,000 from their IRA to a charity of their choice, without having to pay income tax on it.
“This is really significant,” says Joe Baldasare, vice president of development at The Dayton Foundation. “There are many charitable people who find themselves in this category. They are required to begin withdrawing money from their IRA, but they may be in a place where they don’t need the additional income.”
Joe Baldasare, vice president of development, The Dayton Foundation
The PATH Act is actually a permanent version of the Pension Protection Act, which first was offered in 2006 and renewed annually each following year. However,that Act’s required renewal, which took place in mid-December each year, left little time for individuals to learn about and take advantage of its benefits.
Organizations such as The Dayton Foundation hope that the PATH Act’s permanency will give individuals more time to consider their options and will increase exposure about how it can stretch charitable dollars.
“Many of the people who would be taking advantage of this may have an income tax rate as high as the mid- or upper 30 percent, so that can be pretty significant when you are talking about $100,000,” Baldasare says. “This is where we believe The Dayton Foundation can help. Individuals can take a large amount out of their IRA, but not feel as if they have to give it all to their charitable organization in one lump-sum.”
Helping donors help others
The Dayton Foundation, the region’s community foundation, was founded 95 years ago to create charitable funds in an individual, family or business’s name, with the intent of overseeing the money and making sure it is distributed exactly when and how the donor wishes. The Foundation currently has over 3,300 charitable funds with assets approaching $500 million – ranking it in the top 40 of the 800 community foundations that exist in the nation.
“It’s our job to steward those dollars and to make sure each donor’s intentions are carried out and, in some cases, in perpetuity,” Baldasare says. “We have some funds that were established in the 1920s that are still making charitable donations to the original area the donor intended.”
One of the benefits of the Foundation is that it makes donation distribution easy for those who want to give to more than one charity or who desire a large donation to be given over a period of years. Both scenarios may be common for those who are withdrawing a sizeable amount from their IRA to take advantage of the income tax break and meet their required minimum distribution (RMD).
Staunch Dayton supporters Barbara Hayde and Ron Budzik have partnered with The Dayton Foundation many times to ensure that their donations were handled the right way and in the right time.
Donors Barbara Hayde and Ron Budzik
“They make it so easy – they really do,” says Hayde, a founder and retired president of Dayton’s Entrepreneur Center. “We always have made the decision first as to where our money will go. We get our money from the IRA, give it to The Dayton Foundation, and then they hold it in a fund that provides annual grants for the charity we have designated.”
Budzik, Hayde’s husband, has a long-standing involvement in the Dayton community, from spearheading the Schuster Performing Arts Center’s funding to serving as a consultant to the Dayton Business Committee. Both their involvement, as well as their heart for Dayton’s future, have fueled their investments.
A heart for the next generation of Daytonians
The couple took advantage of the PATH Act to stretch their dollars when giving to Dayton Children’s Hospital and the Dayton Early College Academy.
“We want to make sure children in Dayton are educated, that the schools they are in are good schools, and that they have facilities such as the Dayton Children’s Hospital at their disposal,” Hayde says. “These are the children who are going to be our future leaders, so it is important that we make sure they have everything they need to be the best that they can become.”
“We want to make sure children in Dayton are educated, that the schools they are in are good schools, and that they have facilities such as the Dayton Children’s Hospital at their disposal,” Hayde says.
Hayde says there is no doubt that the ability to withdraw money from the IRA without paying income tax has a direct impact on the amount that ultimately can be given to a charity.
“When you think about the numbers, if you don’t have to pay taxes on it, it’s like getting a bonus,” she says. “You now have money that you wouldn’t have had before. So you can look at it as being able to up the ante in terms of how much you can give.”
Have questions about how you can donate from your IRA to your favorite charitable organization? Visit The Dayton Foundation’s website or call (937) 222-0410.