By Gabriella Colarusso
I struggle every year to find the perfect gift for each person on my holiday list. But amid the usual flurry of requests for electronics, books and sweaters, I find a few family members who don’t ask for anything. So, I’ve resorted to gift cards, which seems somewhat impersonal.
One year, my aunt came up with an idea that seemed both personal and in the befitting of the spirit of the season. She gifted money to the international human rights organization Amnesty International in my name.
The gift had perfectly suited me as I am a strong advocate for human rights. And it also gave her something in return. She didn’t have to pay taxes on the amount she donated as the money came from her IRA. My aunt was older than 70 ½ years of age, so she could send a check from her IRA account to the charity of my choice.
The adjustable gross income from her IRA was lowered because of her gifting. Each year most people older than the age of 70 who have IRAs have the option of giving up to $100,000 directly from their accounts to qualified charities. These gifts do not show up as income from her IRA and therefore she is able to claim a lower gross income on her taxes. My aunt’s spouse, who is younger, cannot take money from her own IRA yet, but can make a similar donation and claim it on her taxes as a charitable deduction.
My sister, on the other hand, wasn’t excited about having money gifted to a charity because she was struggling to pay her college tuition. Our aunt was able to help her out and receive the same tax benefits as she did with her gift to me. As the IRS states on its website, gifts that fall under the category of not taxable gifts include:
- Gifts that are not more than the annual exclusion for the calendar year.
- Tuition or medical expenses you pay for someone (the medical and educational exclusions).
- Gifts to your spouse.
- Gifts to a political organization for its use.
My loving aunt was able to help with my sister’s tuition, donate to a meaningful charity on my behalf—and reap a tax benefit.
Finding special gifts for the holidays, birthdays and any other occasions can be a challenge. But there are many ways to help relatives, friends and charities that can also help you.
Gabriella Colarusso works on website content, social media and client newsletters for FAI Wealth Management and serves on the boards of HopeWorks of Howard County and Business Women’s Network of Howard County.