IRA Charitable Rollover Extended and Made A Permanent Law!

2015 Rollovers Must be Made by Thursday, December 31

It’s back – and no more waiting in uncertainty every December… the IRA Charitable Rollover option has just been signed into law. This means that from now on, traditional (pre-tax) IRA holders 70 ½ years or older may use part or all of their Required Minimum Distribution (RMD) to donate up to $100,000 directly to charity, fulfilling their RMD and avoiding taxation on it as income.But you have to act fast – by December 31!

For taxpayers who plan to give money to charity, this technique offers several benefits. While there is no tax deduction for the donated assets, they don’t count as income either—unlike most withdrawals from traditional IRAs. The lower income can help a person avoid taxes on Social Security benefits or higher Medicare premiums. Reporting lower income may also help IRA donors remain in lower tax brackets.

The bottom line is, if you itemize deductions on your 1040 personal income tax return, you’ll come out ahead making gifts this way instead of taking withdrawals from your traditional IRA, paying income taxes, and then making a gift to charity.

As we approach the December 31 deadline for 2015, here’s what you need to know.

The assets must be transferred directly from the IRA custodian, such as a bank or brokerage, to the charity.

  • To qualify for the break, the donation must be to a charity and not to a donor-advised fund, a grant-making foundation, or a charitable gift annuity.
  • There can be no benefit back to the taxpayer from the charity – dues and donations to Beth Am DO qualify; tuition or event gifts do not.
  • The IRA donation can fulfill an existing pledge to the charity. An IRA charitable rollover may be used to pay dues or make gifts to the Annual Campaign, endowment or other funds at Beth Am.
  • The $100,000 limit is per person, so each partner in a married couple can donate up to that amount if each has an IRA.
  • The taxpayer must have proper proof of the IRA transfer in hand before filing his tax return.
  • IRA donors can’t return required annual payouts to their accounts. For example, if an IRA owner has a $15,000 required withdrawal for 2015 and has already taken out that amount because he was worried Congress wouldn’t renew the provision, he can’t return $2,000 to the account in order to make a $2,000 IRA transfer to charity this year.

It’s important to note that making charitable donations from your IRA is also a great way to avoid the possibility that the government will impose taxes of up to 60% on IRA funds not distributed while you are alive. While the IRA Charitable Rollover provision is for making gifts NOW, IRA funds can be heavily taxed after your death and before the funds reach your heirs – making them a particularly good vehicle for making legacy gifts to your favorite organizations. Simply put, giving from your IRA means more dollars can go to a charity instead of Uncle Sam.

To prepare a rollover gift, simply contact the institutional holder of your IRA account; we also encourage you to consult your personal financial adviser before making decisions.