Since being introduced in 2006, the charitable IRA rollover has become a favorite of charitably-minded taxpayers. They have enthusiastically embraced the opportunity to transfer up to $100,000 each year to charity without it being treated as a taxable distribution. Despite such popularity the charitable IRA rollover has faced extinction several times. Now the December 31, 2013, deadline looms as the last chance for taxpayers 70 1/2 or older to take advantage of this simple but powerful planning strategy unless Congress once again intervenes and extends its reach into future years.
What are the requirements and restrictions for making a charitable IRA rollover gift?
- The donor must be 70 1/2 or older.
- The gift must be made directly from the IRA to an eligible charitable organization in 2013.
- Gifts to all charities combined cannot exceed a total of $100,000 per taxpayer for the year.
- The gifts must be outright, and no material benefits can be received in return for the gifts. Thus, a transfer for a gift annuity, charitable remainder trust, or pooled income fund is not permitted.
- Gifts cannot be made to a donor-advised fund, supporting organization, or private foundation.
- The gift is not included in taxable income, and no charitable deduction is allowed.
- The gift can only be made from an IRA. Gifts from a 401(k), 403(b), and 457 plans are not permitted.
Is his the right gift for you to make? Yes, if:
- You want to make a charitable gift, and your IRA constitutes the largest share of your available assets.
- You are required to take a minimum distribution from your IRA, but you do not need additional income.
- You do not itemize your deductions. In that case a personal IRA distribution increases your taxable income without the benefit of an offsetting deduction. A charitable IRA rollover will not be included in your taxable income even if you do not itemize other deductions.
- You live in a state where retirement plan distributions are taxable on your state income tax return but which does not allow itemized charitable deductions.
- You would like to make an additional charitable gift, but it would not be deductible because of the annual 50-percent-of-adjusted-gross-income limitation on charitable contributions. The charitable IRA rollover is equivalent to a deduction because it is not included in taxable income.
- You have an outstanding pledge to a charity. The charitable IRA rollover can satisfy a pledge without violating rules against self-dealing.
What steps should you take to make a gift?
- If you want to make a qualifying 2013 transfer, contact your IRA administrator and instruct that person to transfer funds to the charity(ies) you designate.
- Contact our office. We will answer your questions and provide instructions for completing your gift.