2014 Charitable IRA Rollover

UPDATED: December 22, 2014 11:03PM

It's official, Congress has passed legistlation which includes a retroactive enactment of the IRA Rollover to January 1, 2014. This provision gives donors age 70 ½ and older the opportunity to transfer up to $100,000 from their IRA to a qualified public charity free of federal income tax.

This retroactive extension is important to donors, many of whom donate a portion of their IRA distribution each year. We receive questions from donors on a regular basis on the subject. A gift to a charitable organization from an individual’s IRA can count toward the annual Required Minimum Distribution required by the IRS. Moreover, by reducing taxable income, the provision can help donors avoid or reduce tax implications.

Generally, the required annual distribution is taxable income to the account owner. However, the charitable rollover offers another option for the RMD. Using a qualified charitable distribution, one can direct the custodian of their IRA to distribute up to $100,000 to a public charity of their choice, without having to count the distribution as taxable income. (The taxpayer does not get a charitable deduction, but since it was never counted as income, the taxpayer still benefits.) This can be a significant benefit for individuals, and particularly for individuals who do not itemize their deductions and therefore would otherwise not be able to take a charitable deduction.

The IRA Charitable Rollover is one of the many “temporary” laws that were initially only for two years, but that Congress kept renewing, until Congress allowed it to expire at the end of 2013. Up until last week, the charitable distribution was not an option for 2014. But, keep in mind the current extension is only for the 2014 tax year; in other words, the ability to satisfy ones 2015 RMD with a charitable rollover is questionable, and could be for some time.

Whether an individual is looking to use the recently extended charitable rollover distribution, or will take the distribution themselves, the December 31 deadline is quickly approaching. The IRS website has more information on IRAs and RMDs, including a frequently asked questions section.

We have tools, ready-to-drop marketing pieces, and conversation starters available to assist our clients who are interested in opening this option to their donors. There is no additional cost to take advantage of these resources for our clients who are current and in good standing.

The above information is not to be considered legal advice for any individual or organization, but is presented as information for our clients and future clients.