IRA Charitable Rollover Extension: What You Need to Know Now
This popular tax-wise giving option is available throughout 2013.
FREQUENTLY ASKED QUESTIONS
What is a charitable IRA rollover?
The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income -- and count toward their required minimum distribution -- certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including the Radford University Foundation, Inc.
The provision was first enacted for tax years 2006 and 2007, and has been extended periodically, most recently in January 2013, when it was made available for 2012 (retroactively) and for 2013.
How does this help me?
A charitable IRA rollover makes it easier to use IRA assets, during lifetime, to make charitable gifts.
Why will lifetime IRA gifts be easier?
Under current law, withdrawals from traditional IRAs and certain Roth IRAs are taxed as income, even if they are immediately directed to a charity. The donor receives a tax deduction for his or her donation, but various other federal, and sometimes state, tax rules can prevent the deduction from fully offsetting this taxable income. As a result, many donors have chosen not to use IRA assets for lifetime gifts. The charitable IRA rollover eliminates this problem for a limited time.
What gifts qualify for a 2013 charitable IRA rollover?
A gift that qualifies, technically termed a “qualified charitable distribution,” must be:
Made by a donor age 70 1/2 or older
Transferred from a traditional or Roth IRA directly to a permissible public charity, such as the Radford University Foundation Inc.
Completed in calendar year 2013 for the 2013 tax year
In January 2013 I made a retroactive 2012 charitable rollover gift that counted for my 2012 taxes. Can I still make another rollover gift during calendar year 2013?
Yes. As long as each gift qualifies for the tax year in which you are counting it, you can have charitable IRA rollover gifts for both 2012 and 2013.
Your 2013 gift can be made at any time during calendar year 2013, so the deadline for your 2013 gift is Dec. 31, 2013.
Is there a limit on the amount that can be given?
Yes, there is a limit. An individual taxpayer's total charitable IRA rollover gifts cannot exceed $100,000 per tax year.
What about the required minimum distribution?
If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.
Is an income tax deduction also available?
No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.
Why are Roth IRAs included? Aren't withdrawals from a Roth IRA tax-free?
Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a charitable IRA rollover.
Can other retirement plans, such as 401(k) and 403(b) accounts, be used?
No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.
Can a gift be made to any charity?
No. Excluded are:
Donor advised funds
Who can benefit from using the charitable IRA rollover to make a gift?
Persons with significant assets in an IRA
Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
Persons having so few deductions that they choose not to itemize
Can a rollover gift be used to fund a charitable remainder trust or charitable gift annuity?
No. The donor can receive no benefits in return for the gift. This includes life income plan payments.
Are there any benefits that a donor can receive?
The only permissible benefits from a charitable IRA rollover gift are those that would not reduce the tax deduction for which the donor would have otherwise qualified.
What if a withdrawal does not meet the requirements of a charitable IRA rollover?
It simply will be included in taxable income as other IRA withdrawals currently are.
Is the charitable IRA rollover right for everyone?
While this is a great option, other types of gifts may provide donors with more tax benefits. As with any gift planning question, donors should consult their tax professionals for specific advice.
Can I still make a gift with an IRA beneficiary designation?
Yes. Whether or not you choose to make a charitable IRA rollover gift, you can still designate the Radford University Foundation Inc. as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.
If I made a charitable IRA rollover gift in other tax years, can I do this again for the 2013 tax year?
Yes. Even if you and your spouse both made the maximum $100,000 charitable IRA rollover gift to a qualifying charity during one or more previous years, you can still take advantage of this legislation again for the 2013 tax year.
What about 2014 and beyond?
As of this writing, this special tax advantage has not been extended beyond its current Dec. 31, 2013, expiration date.
Contact Bruce Cunningham at (540) 831-2009 or email firstname.lastname@example.org.