The IRA rollover was first enacted in 2006 as part of the Pension Protection Act. The provision allows individuals aged 70 ½ and older to donate up to $100,000 from their Individual Retirement Accounts (IRAs) to public charities without having to count the distributions as taxable income. As part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the IRA Charitable Rollover has been reinstated through the end of 2011. Because the legislation expires on December 31, 2011, donors only have a few more months to take advantage of this opportunity.
You should consider this opportunity if:
- You are age 70 ½ or older;
- You have a traditional or Roth IRA (other plans such as 401(k)s, 403(b)s, SEP, KEOGH, and SIMPLE IRAs do not qualify);
- You do not need the assets currently held in your IRA(s);
- You would like to make a large one-time gift to charity;
- You are subject to the 2% floor on their itemized deductions;
- You do not itemize your deductions at all; or
- You plan to leave part or all of their IRA to charity upon your death.
What you should remember:
- You must be 70 ½ or older to qualify
- Only a direct transfer of the funds to the charity will work (ask the custodian of your IRA account for the appropriate form to request a direct transfer to charity)
- You can only give up to $100,000
- If you have not yet taken your Required Minimum Distributions, you may be able to partially or wholly satisfy that requirement through this type of gift
- There is no separate charitable deduction for this type of gift because of the income tax avoidance already occurring. The usual ceilings on charitable deductions (50% of adjusted gross income for cash, and 30% of adjusted gross income for capital gain assets) do not apply.
- The gift must be an outright gift to the charity. Donors cannot receive any personal benefit from the gift, and planned gifts like charitable remainder trusts or gift annuities do not qualify.
New legislation has been introduced to make the IRA charitable rollover permanent and to expand it such that the $100,000 limit would be lifted, and gifting could begin as early as age 59 ½. Additionally, the requirement that the gift be outright may also be lifted, allowing for gifts through charitable remainder trusts, etc. However, according to the law as it currently stands, the opportunity to make a direct gift from an IRA to charity without taxable income is only available through the end of this year, and you should consult with your attorney or tax advisor to determine whether this would be a good option for you.
- Attorney Serena Baig