IRA to Charity 2013

A man drivingUpon reaching age 70 ½, you generally must take minimum required distributions (RMD) annually from your IRAs and other plans. If you have more money in your IRA than you need for your support, you may want to give some or all of the IRA to charity. The American Taxpayer Relief Act of 2012, dated January 1, 2013 renews the charitable IRA rollover legislation.

Who is eligible to make a tax-free IRA charitable rollover?

The Act allows individuals age 70 ½ or older, at the time of the distribution, to make a direct charitable gift from an IRA of up to $100,000 per year and not have to report the IRA distributions as taxable income on your federal income tax return.

How much can I contribute per year?

An eligible individual can make a direct charitable gift from an IRA of up to $100,000 per year. If you own multiple IRAs from which you intend to make direct charitable gifts, the aggregate of these gifts in any one year cannot exceed $100,000. Payments directly to charitable organizations from your IRA can count toward your IRA RMD for the year. It does not, however, count toward the RMD for 401(a), 401(k), 403(b), 457(b), Keogh, SEP IRA, or other qualified plans.

Can I only make charitable distributions from IRAs?

To qualify, the rollover must be:

  • From a Traditional IRA or a Roth IRA
  • Cannot be done from a 401(a), 401(k), 403(b), 457(b), Keogh, SEP IRA, or other qualified plan

How do I qualify for the charitable rollover provision?

If you only hold assets in your 403(b) plan, for example, you must complete a two-step process to qualify for the charitable rollover provision:

  1. You must roll over a nonqualified pension plan into a qualified IRA (this is generally a tax-free rollover)
  2. The qualified IRA can then be used to make the distribution directly to charity.

In addition, you can make the direct charitable gift:

  • If you’re the beneficiary of an inherited IRA after the death of the IRA owner
  • If you have attained the age of 70½ before the distribution is made.

Which charitable organizations qualify?

The charitable organization must be:

  • A public charity
  • Cannot be a donor advised fund or supporting organization

Does the gift qualify for a charitable income tax deduction?

Charitable gifts under this provision must be made directly from the IRA administrator to a charitable organization. By having the IRA administrator give the money directly to the charity, you are able to exclude the IRA distribution from your income.

Should I request acknowledgment from the charitable organization?

If the charitable organization does not send you a written acknowledgment of the direct gift, you may wish to inform the organization of your donation and request written acknowledgement of:

  1. The gift amount
  2. That the organization is a public charity qualified to receive donations from IRAs
  3. That the gift will not be distributed to a donor advised fund or supporting organization
  4. That no goods or services were received by you in exchange for the contribution

Who can benefit from a charitable IRA rollover?

The charitable rollover may be particularly appealing if:

  • You have an IRA and are required to take minimum distributions and you wish to make charitable gifts.
  • You take the standard deduction and make charitable gifts.
  • You itemize your deductions and typically maximize your charitable deductions.
  • You itemize your deductions and wish to minimize the reduction of other allowable deductions.
  • Your state does not allow state income tax charitable deductions.
  • You have made nondeductible contributions to your Traditional IRA and are thinking of completing a Roth conversion.

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