IRA Gifts Extended Through 2013!
Congress has extended through 2013 the legislation which allows donors to make tax-free gifts from their IRA Accounts. If you are age 70½ or older and do not need all or a part of the distributions from your IRA, you can make tax-free gifts for any amount up to $100,000 before December 31, 2013 from your traditional IRA to qualified charities. (Please do not wait until the last minute—start by at least December 13, 2013 with your IRA Administrator.)
While you cannot claim a charitable deduction for IRA gifts, your gift amount will reduce your taxable estate, and you will not be required to pay federal income tax on any amounts you distribute to qualified charity.
IRA Tax-Free Gifts – in IRS Language: “Qualified charitable distributions”
- Can total up to $100,000 in each tax year (if your spouse has a separate IRA account, you can each contribute up to $100,000 per tax year);
- Can be excluded from your gross income for federal income tax purposes, however no charitable deduction is available;
- Are not subject to limitations on your itemized deductions.
About The IRA Charitable Rollover
The Pension Protection Act of 2006 (PPA) permitted individuals to roll over up to $100,000 from an individual retirement account (IRA) directly to a qualifying charity without recognizing the assets transferred to the qualifying charity as income. While this initial provision expired on December 31, 2007, it has been extended several times. On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 (H.R. 8) into law, extending the provision until December 31, 2013. Note that the new law simply extends the charitable rollover and, other than some modifications regarding timing for 2012 distributions, did not make substantive changes to the operations of the provision.
What is an IRA charitable rollover?
The law uses the term “qualified charitable distribution” to describe an IRA charitable rollover. A qualified charitable distribution is money that individuals who are 70½ or older may direct from their traditional IRA to eligible charitable organizations. The provision has a cap of $100,000 for charitable distributions from individual IRAs each year. Individuals may exclude the amount distributed directly to an eligible charity from their gross income.
Does a donor also receive a charitable deduction when they roll over assets to a charity under this provision?
No. Under this provision, donors benefit by not having to recognize the amount contributed directly from their IRA to a qualifying charity. However, because donors exclude this contribution from their gross income, they cannot take a charitable contribution deduction for the contribution; to do so would result in a double benefit for donors and that is explicitly prohibited.
How do individuals make a qualified charitable distribution?
Individuals must instruct their IRA trustee to make the contribution directly to an eligible charitable organization. Please see your financial planner for more information.