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Donating IRA assets to charity

Investor Education

Legislation offers a tax break for retirees

The Pension Protection Act of 2006 introduced a provision
enabling retirees to take tax-free withdrawals from their
IRA provided the money is transferred directly to
a qualified charitable organization of their choice.
Important update: Although this provision has expired
a few times since the original legislation, most recently at
the end of 2011, a new tax law passed to avert the fiscal
cliff reinstates this option for 2013. In addition, there is a
special transition rule which allows IRA owners to treat a
distribution (or portion of) occurring in December 2012 as
a tax-free charitable rollover if a charitable contribution is
made to qualified organization(s) before February 1, 2013.
Normally, distributions from an IRA must be sent directly
to the charitable organization to meet the requirements of
the rule.

How it works
The provision allows retirees age 701/2 and older to
donate up to $100,000 tax free from their IRA each year.
Generally, when you take a distribution from your IRA, it is
treated as taxable income. Under this temporary provision,
however, those assets are excluded from income if the
distribution is made directly to a charity.
The distribution is not included in your income so you avoid
the potential negative consequences that regular IRA
withdrawals in retirement can create, including taxes on
Social Security benefits. Distributions excluded from
income are also equivalent to a 100% deduction. Normally,
charitable contribution deductions are limited to a lower
percentage (or are eliminated altogether) for taxpayers
who do not itemize and take the standard deduction.

Turn your required distributions
into charitable donations
IRS rules mandate that individuals age 701/2 and older take
RMDs from their IRA each year, regardless of whether the
income is needed. These annual withdrawals are subject
to ordinary income taxes. By making a charitable contribution from your IRA, you can satisfy your RMD amount
without reporting additional income.
This provision may be especially attractive for retirees who
don’t need all the income from their IRA to meet current
living expenses. By donating the money to charity, you can
enjoy the satisfaction of knowing that you are contributing
to a worthy cause while effectively lowering your tax bill.

Is a charitable contribution
from an IRA right for you?
Donating IRA assets can be a financially rewarding
strategy for both you and the charity. As always, you
should talk with your financial representative or tax
advisor before making a decision that alters your tax
situation. Following are several examples where it may
be appropriate.
•Generally, in order to claim a charitable deduction, you
must itemize your tax return. For retirees who no longer
pay mortgage interest, the deductions may be too small
to itemize. The provision offers the tax benefits of a
charitable contribution without your having to itemize
your deductions.

•Some states do not allow residents to deduct a charitable
contribution. Making a donation to a charity directly from
an IRA may provide a way to effectively claim a state tax
deduction. Consult a tax professional for state-specific
guidance.

•Charitable deductions are limited by a taxpayer’s
income — generally up to a maximum of 50% of modified
adjusted gross income. By directing your IRA distribution
to a charity, you can avoid this restriction.

It’s important to consider your tax situation before
deciding whether to make a charitable contribution from
your IRA. Be sure to work closely with your financial
representative to determine whether this tax provision
is right for you.

•If reporting additional income on your Form 1040 increases
your Medicare Part B premiums or negatively affects the
taxability of your Social Security benefits, then making a
charitable contribution from your IRA may be appropriate.

Talk to your financial representative

This information is not meant as tax or legal advice. Tax laws are
complex and subject to change. Please consult a professional tax
advisor to determine how this tax law affects your situation.

GUIDELINES FOR DONATING IRA DISTRIBUTIONS TO A CHARITY
Eligibility

Annual limit

Qualifications

Direct contribution

IRA account owner must be

Maximum amount of

Distribution must be made

The IRA Trustee or

age 701/2 or older at time of

a taxpayer’s qualified

to a qualifying charity;

custodian must make the

IRA distribution in order

charitable distribution

private foundations and

distribution directly to

to take advantage of this

must not exceed $100,000

donor-advised funds are

the charity. Distributions

provision. Rule applies only

per tax year and may

not eligible. Consult a tax

made payable to the IRA

to Traditional, Rollover,

include required minimum

professional for additional

owner and transferred to the

and Roth IRAs; SEPs and

distributions (RMDs).

information.

charity will not qualify.

SIMPLE IRAs are generally
excluded. Distributions of
non-deductible IRA contributions also do not qualify.

For more information on eligible charitable organizations, you can reference Publication 78 at www.IRS.gov.
Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing.
For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or
product, call Putnam at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing.
Putnam Retail Management

Putnam Investments | One Post Office Square | Boston, MA 02109 | putnam.com�

II828 279312 1/13

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Donating IRA assets to charity.

  • 1. Donating IRA assets to charity Investor Education Legislation offers a tax break for retirees The Pension Protection Act of 2006 introduced a provision enabling retirees to take tax-free withdrawals from their IRA provided the money is transferred directly to a qualified charitable organization of their choice. Important update: Although this provision has expired a few times since the original legislation, most recently at the end of 2011, a new tax law passed to avert the fiscal cliff reinstates this option for 2013. In addition, there is a special transition rule which allows IRA owners to treat a distribution (or portion of) occurring in December 2012 as a tax-free charitable rollover if a charitable contribution is made to qualified organization(s) before February 1, 2013. Normally, distributions from an IRA must be sent directly to the charitable organization to meet the requirements of the rule. How it works The provision allows retirees age 701/2 and older to donate up to $100,000 tax free from their IRA each year. Generally, when you take a distribution from your IRA, it is treated as taxable income. Under this temporary provision, however, those assets are excluded from income if the distribution is made directly to a charity. The distribution is not included in your income so you avoid the potential negative consequences that regular IRA withdrawals in retirement can create, including taxes on Social Security benefits. Distributions excluded from income are also equivalent to a 100% deduction. Normally, charitable contribution deductions are limited to a lower percentage (or are eliminated altogether) for taxpayers who do not itemize and take the standard deduction. Turn your required distributions into charitable donations IRS rules mandate that individuals age 701/2 and older take RMDs from their IRA each year, regardless of whether the income is needed. These annual withdrawals are subject to ordinary income taxes. By making a charitable contribution from your IRA, you can satisfy your RMD amount without reporting additional income. This provision may be especially attractive for retirees who don’t need all the income from their IRA to meet current living expenses. By donating the money to charity, you can enjoy the satisfaction of knowing that you are contributing to a worthy cause while effectively lowering your tax bill. Is a charitable contribution from an IRA right for you? Donating IRA assets can be a financially rewarding strategy for both you and the charity. As always, you should talk with your financial representative or tax advisor before making a decision that alters your tax situation. Following are several examples where it may be appropriate.
  • 2. •Generally, in order to claim a charitable deduction, you must itemize your tax return. For retirees who no longer pay mortgage interest, the deductions may be too small to itemize. The provision offers the tax benefits of a charitable contribution without your having to itemize your deductions. •Some states do not allow residents to deduct a charitable contribution. Making a donation to a charity directly from an IRA may provide a way to effectively claim a state tax deduction. Consult a tax professional for state-specific guidance. •Charitable deductions are limited by a taxpayer’s income — generally up to a maximum of 50% of modified adjusted gross income. By directing your IRA distribution to a charity, you can avoid this restriction. It’s important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to work closely with your financial representative to determine whether this tax provision is right for you. •If reporting additional income on your Form 1040 increases your Medicare Part B premiums or negatively affects the taxability of your Social Security benefits, then making a charitable contribution from your IRA may be appropriate. Talk to your financial representative This information is not meant as tax or legal advice. Tax laws are complex and subject to change. Please consult a professional tax advisor to determine how this tax law affects your situation. GUIDELINES FOR DONATING IRA DISTRIBUTIONS TO A CHARITY Eligibility Annual limit Qualifications Direct contribution IRA account owner must be Maximum amount of Distribution must be made The IRA Trustee or age 701/2 or older at time of a taxpayer’s qualified to a qualifying charity; custodian must make the IRA distribution in order charitable distribution private foundations and distribution directly to to take advantage of this must not exceed $100,000 donor-advised funds are the charity. Distributions provision. Rule applies only per tax year and may not eligible. Consult a tax made payable to the IRA to Traditional, Rollover, include required minimum professional for additional owner and transferred to the and Roth IRAs; SEPs and distributions (RMDs). information. charity will not qualify. SIMPLE IRAs are generally excluded. Distributions of non-deductible IRA contributions also do not qualify. For more information on eligible charitable organizations, you can reference Publication 78 at www.IRS.gov. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call Putnam at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing. Putnam Retail Management Putnam Investments | One Post Office Square | Boston, MA 02109 | putnam.com� II828 279312 1/13