The Federal Path Act includes provisions to allow a taxpayer who is age 70½ or older to make tax-free distributions from their IRA’s to qualified charities.

tax rules for ira distributionThe Path Act allows an individual who is over the age of 70½ to make a direct distribution from their IRA account to a charity.  The benefit of doing such is that the amount transferred to the charity will be counted as part of the taxpayer’s qualified minimum distribution and it will also not be included in the taxpayer’s gross income for Federal and State income taxes.  In order to qualify as a qualified charitable distribution, the distribution needs to be made directly from your individual retirement account to the qualified charity.

On May 30, 2018, Governor Reynolds signed SF2417 which provides that beginning in the year 2018 Iowa will conform with the Federal provision allowing taxpayers 70½ and older to make tax-free distributions from their IRA’s to a qualified charity.

Such strategy will be useful to many individuals who are no longer able to itemize deductions on their Federal return due to the increase in the standard deduction.

If you have questions or need assistance navigating complicated Tax laws, please reach out to us through the contact page in our Web site or call 515-225-1100.