CHARITABLE IRA ROLLOVER

The recent financial rescue package has extended the IRA charitable rollover provisions through December 31, 2009.  This special legislation allows you to make charitable gifts directly from a traditional or Roth Individual Retirement Account (IRA) without incurring federal income taxes.                                                        

The following limitations apply:

• The donor must be age 70.5 or older.
• The cap on annual IRA rollovers is $100,000.
• The contribution must be a direct gift to a charity

Typically, taxpayers age 70½ and older are required to make annual distributions from their retirement accounts. The regular distributions are included in the taxpayers’ adjusted gross income (AGI), and taxpayers pay taxes on them.

The charitable IRA rollover enables taxpayers to make donations directly to charitable organizations from their IRAs without counting them as part of their AGI and, consequently, without paying taxes on them.  However, donors cannot take a charitable deduction for these rollover gifts.

We are providing this information as it may be another means of paying your annual pledge.  Please check with your tax accountant or tax return preparer before making any decisions.

If you have any questions, please contact me.

Don McCleary, Treasurer

Who Benefits from the Charitable IRA Rollover?

• Taxpayers who don’t itemize their deductions. The IRA rollover most benefits the nearly two thirds of Americans who do not itemize deductions on their annual income tax returns and therefore do not receive a tax benefit for their charitable contributions. Non-itemizers include lower- and middle-income taxpayers, as well as an estimated 5.2 million higher-income individuals.

• Itemizing taxpayers who’ve reached the charitable giving limit. Donors who itemize their taxes are prohibited from deducting more than 50 percent of their AGI for the purpose of making charitable donations. However, donations from an IRA are excluded from the percentage limit, allowing individuals who have reached the 50 percent threshold to give more.

• Taxpayers whose tax deductions decrease as their income increases. Several federal tax deductions – dependent and personal exemption deductions and deductions for medical expenses and non-business casualty losses, for instance – become smaller as a taxpayer’s income increases. By making charitable donations from an IRA, rather than making regular, required distributions that qualify as income, taxpayers keep their annual income down and qualify for other tax deductions.

This information is intended to provide general guidance and is not a substitute for professional counsel. Consult your tax or legal advisor for professional guidance.

The above information was obtained from the National Philanthropic Trust.