The IRA Charitable Rollover was first enacted in 2006 as part of the Pension Protection Act, and was extended a number of times through 2011. The provision allows individuals aged 70½ 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.

Under the Taxpayer Relief Act of 2012, the IRA Charitable Rollover has been reinstated for 2012 and 2013.

If you did not make a qualifying gift to a charity from your IRA in 2012 (hoping for an extension of the law), you can still do so in one of two time-limited ways. There is a January 31, 2013 deadline for both of these options.

  1. Make a 2012 IRA Charitable Rollover gift in January 2013. You can make a rollover gift in January and “elect” to have this be considered made in 2012. How the election is to be made will be specified by the Secretary of the Treasury later this year. You can then make a second qualifying gift in 2013 of up to $100,000.
  2. Convert a December 2012 IRA distribution into a 2012 IRA Charitable Rollover gift. If you took a distribution from your IRA in December and that distribution meets all of the IRA Charitable Rollover criteria, except for the direct transfer to charity requirement, then you can now claim it as a charitable gift in 2012, to the extent that you now transfer the distribution in cash to a charitable organization. If you took a distribution in December and made a gift to a charity in December, these two can also be tied together, as long as the charitable distribution occurred after the withdrawal from the IRA.

IRA Charitable Rollover gifts can be advantageous to you from a tax standpoint if:

  • you do not itemize deductions;
  • you pay state income tax but cannot take charitable deductions on the state return;
  • you would not be able to deduct all of your charitable contributions because of deduction limitations; or
  • an increase in taxable income may negatively impact your ability to use other deductions.

The requirements of an IRA Charitable Rollover gift are:

  • Eligibility Age. You must be at least age 70½.
  • Annual Cap. Except as explained above, your total combined IRA Charitable Rollover gifts cannot exceed $100,000 in any one year.
  • Eligible Charities. IRA Charitable Rollover gifts must go to a public charity that is not a supporting organization. Contributions to donor-advised funds and private foundations, except in narrow circumstances, do not qualify for tax-free IRA Rollover treatment.
  • Eligible Retirement Accounts. Distributions can only be made from traditional Individual Retirement Accounts or Roth IRAs. Charitable donations from 403(b) plans, 401(k) plans, pension plans, and other retirement plans are not eligible for this treatment.
  • Directly to the Charity. Distributions must be made directly from the IRA trustee payable to the public charity. However, as noted above, if you took a distribution from your IRA in December, and distribute it to a charity before January 31, 2013, the ‘Directly to Charity’ requirement is waived.
  • No Gifts in Return. You cannot receive any goods or services in return for IRA Charitable rollover contributions in order to qualify for tax-free treatment.
  • Written Receipt. In order to benefit from the tax-free treatment, you must obtain written substantiation of each IRA Charitable Rollover contribution from each recipient charity.

 


CONTACT

If you have any questions about this alert or would like further information on the recent tax changes, please contact us.

Return to Resources