Jump start your legacy with tax-free gifts from your IRA

Posted On: Wednesday, 15 September 2021

Over 60 million taxpayers in the United States own an individual retirement account1 (IRA). 

Starting at age 72, IRA owners are required to take money out of their account each year (a “required minimum distribution” or RMD). RMDs are taxable income, so if they are not necessary for your everyday expenses, they could become more of a burden, increasing your taxes, or even bumping you into a higher tax bracket2. This could have a negative impact on your Social Security or Medicare benefits. Further still, if you do not meet the required minimum, you could be subject to a massive 50-percent penalty on the amount that is not withdrawn. 

This all might seem like a lose-lose situation. But starting at age 70½, IRA owners can donate up to $100,000 each year straight from their IRA to the American Legion Auxiliary Foundation, a 501(c)(3) organization. The money will not be taxed, will not count as income, and will satisfy part or all of your RMD when you turn 72 years old. This option is not only an incredible tax advantage, but it can also change the lives of veterans across the country – and every penny will be directed to support your charitable goals. 

Plus, you will get to see your gift in action – helping veterans in need heal through art therapy, supporting the creation of a new veterans homeless shelter, or even supporting a young woman’s opportunity for leadership growth and government knowledge. 

As always, at any age you can designate the ALA Foundation as a beneficiary on your IRA and it will pass to us tax-free after your lifetime. But why not get started now while saving money in taxes?

Reach out to your retirement provider today to make a gift and make an impact on veterans, military, and their families. 

Here are a few helpful tips to get you started:

  • You can start making these gifts at age 70½, though RMDs are not mandatory until you are 72 years old.
  • You can spread your gifts over multiple charities if you so choose, but you cannot exceed the $100,000 amount. 
  • If your spouse has an IRA, they may also give up to $100,000 on top of your gift.
  • You cannot claim an income tax deduction on these gifts.
  • You cannot receive any tangible benefit from making your gift to the charity. 
  • This benefit is only relevant for IRAs – 401(k) accounts have different benefit options.
If you have any questions about giving through your IRA account, please do not hesitate to reach out to the Development team at ALA National Headquarters either via email at development@ALAforVeterans.org or by phone at (317) 569-4500.*

By Sydney DeLong, Staff Writer 
  1. Tax Policy Center: Urban Institute & Brookings Institution
  2. Schwab Charitable QCDs
*This tax information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, we recommend that you consult with a qualified tax advisor, CPA, financial planner, or investment manager. Depending on the type of account you have, there are different rules for withdrawals, penalties, and distributions.

ALA Mission

In the spirit of Service, Not Self, the mission of the American Legion Auxiliary is to support The American Legion and to honor the sacrifice of those who serve by enhancing the lives of our veterans, military, and their families, both at home and abroad. For God and Country, we advocate for veterans, educate our citizens, mentor youth, and promote patriotism, good citizenship, peace and security.