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IRA Rollover

In January, 2013, Congress extended an excellent charitable planning opportunity for both 2012 and 2013. The law allows charitably minded individuals a golden opportunity to make gifts directly from their IRAs and exclude the amount of their gifts from gross income. The following requirements must be met:
  • The donor must be 70 1/2 years of age or older
  • The transfers must go directly from the IRA to qualified charities
  • Gifts cannot exceed $100,000 per taxpayer per year
  • Gifts must be outright, not to donor advised funds, charitable remainder trusts, or for charitable gift annuities;
Without this provision, if an individual withdrew up to $100,000 from his or her IRA and contributed it to charity, he or she would first have to include the $100,000 in his or her income. The individual would also be treated as having made a charitable contribution for the amount donated to charity. However, IRS rules limit the amount of charitable contributions of cash that can be deducted in a given year to 50% of adjusted gross income. Therefore, without the provision, it is possible that an IRA gift would result in a "wash", and the donor might incur extra taxes as the result of the gift. The new provision ensures that problem will not occur.

A gift from your IRA would count against the minimum distribution you would be required to take from your IRA in the future.

So, who benefits from this old provision?
The law presents a wonderful opportunity for individuals to utilize their IRAs creatively to accomplish special philanthropic objectives.

Individuals who usually give up to 50% of their adjusted gross income (AGI)—the ceiling on the allowable charitable deduction for any year—can now give up to $100,000 more from their IRA accounts, which is not subject to this limitation or taxed as a distribution.

Individuals who do not itemize and who make a charitable gift in an amount less than the standard deduction will benefit from a transfer directly from their IRA to charity.

Individuals who are required to take minimum withdrawals, but don't need additional income, can satisfy up to $100,000 of the distribution requirement with a transfer to charity.