New Tax Law Allows Gift from Your IRA with a Charitable Rollover Retroactive to 2012

The IRA Charitable Rollover (which lapsed on December 31, 2011) allowed individuals to make gifts of up to $100,000 directly from their Individual Retirement Accounts (“IRAs”) to charity without having to report the distribution as taxable income on their income tax return. On January 2, 2013, President Obama signed the American Taxpayer Relief Act (“the Act”), allowing charitable rollover gifts to be implemented retroactively for 2012 and extended through 2013, with the same restrictions as in previous years:

  • The donor must be age 70½ or over and must be required to take annual IRA distributions.
  • Total combined IRA Charitable Rollover contributions cannot exceed $100,000 in any year.
  • Charitable contributions from an IRA must go directly to a public charity. Contributions to donor-advised funds and private foundations generally do not qualify as tax-free IRA Charitable Rollover contributions.
  • Distributions must be made from traditional, rollover, or Roth IRAs.
  • Distributions must be payable directly from the IRA custodian to the charity.
  • Donors cannot receive goods or services in return for the contributions.

The  Act retroactively reinstates the IRA Charitable Rollover for 2012 and allows any otherwise eligible gifts made in the month of January 2013 to be treated as a 2012 donation.  The new law also specifies that any portion of a distribution from an IRA to a taxpayer made in the month of December 2012 may be treated as a qualified charitable distribution in 2012 for purposes of the IRA Charitable Rollover.

Finally, the IRA Charitable Rollover has been reinstated for all of 2013 and will now expire at the end of this year on December 31, 2013.
Donors who take advantage of the IRA Charitable Rollover provision can:

  • Avoid increasing their taxable income with the required minimum distribution from their IRA, which for some may result in a higher tax bracket.
  • Reduce assets in their IRA accounts that can be highly taxed at a later time.
  • Make meaningful – including larger – outright gifts to their favorite charities.
  • See their gifts impact their charities’ mission and results now.

For more information and a sample instruction letter for your plan administrator, please contact Mike Coppes, Assoc. Director of the Office of Estate & Gift Planning; at Michael.Coppes@uhfoundation.org or (808) 956-3589.