Tax Insights

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Special Opportunity for Charitable IRA Rollover Gifts

H.R.8, the “American Taxpayer Relief Act” provides a special opportunity for Charitable IRA Rollover Gifts in 2012 if they are made in January of 2013.  The new tax law which has been signed by the President extends the Charitable IRA Rollover through December 31, 2013. This means that Donors age 70 and ½ or older can ask their IRA custodian to transfer up to $100,000 in 2013 to a public charity. The transfer will be a totally tax-free transfer to the public charity and thus equivalent to a 100% charitable deduction which is not subject to the normal charitable giving limit of 50% of adjusted gross income. There is of course no separate charitable deduction for the tax-free transfer to the public charity.

There is also a special opportunity in January of 2013 to make a 2012 Charitable IRA Rollover gift if the donor received an IRA distribution in December of 2012. Because the Congress did not extend the Charitable IRA Rollover provision during 2012, the Fiscal Cliff legislation also states that donors may treat an IRA distribution made after November 30, 2012 as a 2012 Charitable IRA Rollover gift if the recipient of the December distribution makes a charitable gift of the December distribution to a qualified charity before February 1, 2013. This means that a donor who received an IRA mandatory distribution or other distribution during December of 2012 may choose to make a charitable gift in January of 2013 to a qualified charity and it will be treated as a 2012 Charitable IRA Rollover gift. The normal rules apply: the donor must be 70 and ½ and the amount must be $100,000 or a lesser amount and the gift must be made to a public charity.

As in all cases, consult your own advisors who along must assume final responsibility in advising you whether or not this gift is appropriate in your own unique circumstance.

By Gary W. Fleming, CPA