IRA Disbursement Donations May Help Mitigate the Effect of Changes in Tax Law on Your Non-Profit

Non-Profits across the country could lose up to $100 billion in 2018 due to increases in the standard deduction that is part of the Tax Cuts and Jobs Act signed into law in December of 2017.

A representative from the Arizona Communities Foundation, speaking at the Nonprofits Connections meetings this past Friday in Sedona, shared three strategies to help your non-profit mitigate the consequences of the new tax law.

The first – encourage your donors to donate stock instead of cash.

The second?  Encourage donors age 70-1/2 and over to donate their required annual IRA distributions. Traditional IRAs require annual distributions be taken once the account holder reaches age 70-1/2. Seniors pay income tax on those distributions, but additionally as disconcerting – any increase in a senior’s taxable income lower has the potential to negatively effect certain tax credits and deductions, including Social Security and Medicare. In some cases required annual IRA distributions may even bump the taxpayer into a higher tax bracket, increasing income taxes on all their income.

The good news – donors can direct their required disbursements directly to a charity and avoid any negative impact on their federal income taxes and potential effects on tax credits and deductions, while also getting deduction a potential deduction for the donation. There are some restrictions (they cannot receive anything in return), and the distribution can’t go through the donor. It has to go directly from the IRA custodian to the charity.

Again, before encouraging donors to donate their required annual IRA distributions, consult with an expert. Then encourage a valued donor to make the first such donation and use their story to encourage other donors to do the same.

Stay tuned for more strategies to mitigate the effect of tax law changes on your non-profit. Just click the FOLLOW button on the right to be notified by email when a new article is posted.

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