I would like to fund a Gift Annuity and I do not itemize so I would like to donate directly from my 401K to fund this gift annuity. Would there be taxes that have to be paid on the money I take from my 401K?
Yes, you pay taxes on the money you take out of the 401k, and then a deduction for it on Schedule A, but they don't even out and you will likely end up owing federal and state income taxes.
For 2013 you can make a donation up to 100k from your traditional IRA (not SEP, SIMPLE, or Roth) directly to the charity. The donated amount is not included in your income. Of course, you can't take a deduction for the amount on Schedule A. So it means you should rollover all or part of your 401k to the IRA if you want to take advantage of this offer.
See
If he doesn't already have an IRA, can he roll money over into one from his 401k and then donate it?
Yes.
.... but he can't roll over his required minimum distribution. Assuming he is no longer working for the employer where the 401K is funded, he should have been taking an RMD for each year starting when he turned age
70 1/2.
SEP and SIMPLE are merely ways of getting money into a traditional IRA. Once it's there, it behaves just like any other traditional IRA, so it could be used for the direct charitable contribution.
In the OP's case the fund would be required to distribute the RMD. Beyond that, OP could roll the amount he wants to use for the donation into a traditional IRA and make the tax-free distribution from there.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
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