Gift Planning

Charitable Gifts Through Your IRA

On December 16th, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which includes an extension of the IRA Charitable Rollover. The extension applies to 2010 and 2011. The extension will allow individuals 70½ and older to donate up to $100,000 from their IRAs to charities tax-free. Donors do not receive an income tax charitable deduction. This provision allows donors to transfer (or “rollover”) money from their IRAs directly to charity, without having to recognize the transfer as income. January 31, 2011, is the deadline for gifts allocated to 2010; a separate donation may be made at any time during 2011 for that year.

The following will supply answers to some of the important questions surrounding the IRA Charitable Rollover, though you should always consult with your advisor on the specifics of your situation.

IRA Charitable Rollover

The IRA charitable rollover has been extended applying to distributions made throughout both the 2010 and 2011 tax years.

  1. Who qualifies? Individuals who are at least age 70 ½ at the time of the contribution
  2. How much can I transfer? $100,000 each year in 2010 and 2011
  3. From what accounts can I make transfers? Transfers must come from IRAs directly to charity. If you have retirement assets in a 401(k), 403(b), etc., you must first roll those assets into an IRA, and then can make the transfer from the IRA directly to charity
  4. To what charities can I make gifts? Tax exempt organizations to which deductible contributions can be made (Wharton qualifies)
  5. Can I use the transfers to fund life-income gifts like charitable remainder trusts or charitable gift annuities? No, these are not eligible
  6. Can I make a transfer to my donor advised fund or supporting organization? No, these are not eligible
  7. What are the tax implications?
    1. Federal – You do not recognize the transfer as income, provided it goes directly from the IRA provider to charity; you are not eligible for an income tax charitable deduction
    2. State – each state has different laws, so check with your own advisors. Some states have a state income tax and will include this transfer as income. Within those states, some will allow a charitable deduction and others will not. Other states base their state income tax on the federal income or federal tax paid. Still other states have no income tax at all
  1. Can the transfer qualify as my minimum required distribution? Once individuals reach age 70 ½, they are required to take minimum distributions from their retirement plans each year, according to a federal formula. IRA rollovers to charity qualify toward your minimum required distribution.
  1. I’m over age 70 ½ should I consider an IRA rollover? Yes if:
    1. You do not itemize deductions but make charitable gifts, OR
    2. You are required to take a distribution from your IRA that you just don’t need, OR
    3. Your charitable gifts already equal 50% of your adjusted gross income
  1. How do I execute an IRA rollover? The sample letter can be used to send to your IRA plan provider for a 2010 gift. It should be modified as appropriate for a 2011 gift. For additional questions contact the Office of Gift Planning at 800.223.8236 or 215.898.6171.