IRA Charitable Rollover

Make Tax-Free Gifts from your IRA

Under the American Taxpayer Relief Act of 2012, traditional IRA owners who are 70½ years old and above, can give any amount up to $100,000 from their IRA accounts to America, without undesirable tax effects. 

In the past, distributions from an IRA account would be reportable as taxable income.  Fortunately now, direct IRA rollovers to charities can be made easily, and although they are not tax-deductible as donations, neither do they count as income that could trigger higher taxes.   And, donors can witness the benefits of their generosity here and now. This unique opportunity expires at the end of 2013.

You Make Take Advantage of an IRA Charitable Rollover if :

  • You are age 70½ or older at the time of the gift.

  • You transfer the funds outright to one or more qualified charities.  Transfers to charitable trusts, donor advised funds, charitable gift annuities, etc. do not qualify.

  • If you took a distribution from your IRA during December 2012, you may make a gift (not to exceed $100,000 in cash) to a charity before February 1, 2013.  This will be treated as a direct transfer, and the amount excluded from 2012 income.

  • If you made a direct gift transfer (not to exceed $100,000) from your IRA to a qualified charity during January 2013 (before February 1, 2013), this will be treated as a direct transfer, and the amount can be excluded from 2012 income.  (or 2013 too?).

  • Gifts made throughout the remainder of 2013 will qualify as a 2013 gift, and be excluded from 2013 income.  (?? Bet Feb & Dec 31, or Jan & Dec 31).

  • If a spouse has their own IRA account and is 70½ or older – he/she may also make up to a $100,000 tax-free donation to the qualified charity of his/her choice.

Some Benefits and Considerations

  • The transfer (or “rollover”) generates neither taxable income nor a tax deduction (it is a “wash ”).

  • Taxpayers who do not itemize deductions may benefit because they cannot reduce their income taxes with their charitable donations.  An IRA rollover would permit non-itemizers to exclude the distribution from income and pay less income tax. 

  • The transfer may count against your unsatisfied required minimum distribution for 2012 or 2013.

  • This opportunity will most benefit donors with significant charitable contributions, because charitable donations cannot exceed 50 % of a taxpayer’s Adjusted Gross Income (AGI).

  • Please note that this opportunity applies only to IRAs and not to other types of retirement plans.

 

- And Please Remember –

It is wise to consult with tax professionals if you are

contemplating gifts in 2013 under the American Taxpayer Relief Act described above.