Endowment Corner: IRA Charitable Rollover Option Extended Through 2011

The compromise Tax bill passed in the final days of 2010 (“Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010”) extends until December 31, 2011, a provision known as the “Charitable IRA Rollover” which allows taxpayers age 70 ½ or older to make tax-free transfers (of up to $100,000 per year) directly from their IRA to charities.

The law, originally enacted in 2006, expired at the end of 2009, but has now been renewed for gifts for calendar year 2010 through December 31, 2011.

You can make distributions directly to one or more charities from your traditional or Roth IRA, as long as you are at least 701/2   years old when you transfer the gifts. Such gifts can be made without increasing your taxable income or withholding. Additionally, funds transferred from your IRA to a charity will NOT subject your Social Security income to higher tax levels, and will count toward you minimum required distribution (MRD).

Example: Jack has $500,000 in an IRA and would like to contribute $25,000 to the BSA Cherokee Area Council #469 in 2011. Upon hearing of the recently renewed Charitable IRA Rollover opportunity, Jack directs the custodian of his IRA to transfer this amount not later than December 31, 2011 directly to the BSA Cherokee Area Council #469  as his 2011 gift. He will not be subject to tax on the $25,000 distributed to the BSA Cherokee Area Council #469. (But neither will Jack deduct this amount because he won’t include it in his taxable income in the first place.)

Giving from an IRA rather than other assets may be especially appropriate if:

  • You use the standard deduction rather than itemizing you deductions, OR
  • You don’t need all of the minimum distribution you’re required to take from you IRA, OR
  • You plan to leave money to charity from your IRA at death anyway, OR
  • You would not be able to deduct all your charitable contributions because of deduction limitations.

Certain limitations apply to these non-taxable charitable distributions from an IRA:

  • The gifts can only be made during 2011
  • You must be at least 70 1/2 years of age when the gift is transferred.
  • Total gifts cannot exceed $100,000 per year, per IRA owner or beneficiary. (Husband and wife with separate IRAs could give up to $200,000 per year.)
  • Gifts must be made directly from you IRA to a public charity and cannot be made to a private foundation, a supporting organization or a donor advised fund.
  • The gifts must be outright. For instance, they cannot be used to establish a charitable gift annuity or fund a charitable remainder trust.

If you would like more information about this or other ways to make a charitable gift from an IRA, please contact John Howk. You can reach him at 918-293-7572 or contact the Scout Service center to arrange an appointment.

Please note: The information in this communication is not legal or tax advice. The BSA Cherokee Area Council # 469 is pleased to offer complimentary gift and estate planning assistance, however, we urge you to seek the advice of a competent professional before implementing any ideas we suggest to you.

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