Charitable IRA “Rollover” Legislation Extended Through 2013
On January 2, 2013, President Obama signed into law H.R. 8, the “American Taxpayer Relief Act of 2012,” which extends retroactively from January 1, 2012, and through 2013 the legislation permitting Charitable IRA “Rollovers.” This means that donors who are age 70 1⁄2 or older can once again make gifts to Williamson and other charities directly from their traditional and Roth IRAs without including the IRA withdrawals in their taxable income.
The legislation permits distributions in the 2012 and 2013 tax years, and allows distributions made through January 31, 2013, to count in the 2012 tax year. Note that because the law was not enacted until 2013:
- You can elect to treat qualified distributions made before January 31, 2013, as 2012 distributions, and
- If you took a distribution from your IRA during December 2012 (defined by the law as “after November 30, 2012, and before January 1, 2013”), you can transfer a portion of that distribution in cash to a qualified charity on or before January 31 and elect to have the cash contribution treated as a 2012 charitable IRA rollover.
For these 2012 qualifying exceptions, distributions must be received by the charity on or before the January 31, 2013, deadline, and you should notify the charity of your intention that your contribution be treated as a 2012 charitable IRA rollover.
In addition, the following limitations and restrictions continue to apply:
- You must be age 70 1⁄2 or older as of the date of the distribution.
- Your qualified charitable distributions to all charities may not exceed $100,000 in the
aggregate in any taxable year.
- Except with respect to cash distributions made under #2 above, the qualified
distributions must be made directly to the charity by the plan trustee – you may not receive the distribution first and then transfer it to us. Contact your plan administrator for information on how to initiate a transfer, or contact us for assistance in making your transfer. 2012 qualifying distributions must be received by the charity on or before January 31, 2013. Qualifying distributions in 2013 must be received by the charity on or before December 31, 2013.
- Qualified charitable distributions will be excluded from gross income for federal income tax purposes and, in many cases, for state income tax purposes as well. However, because the amounts are excluded from taxable income, you will not be eligible to claim an income tax deduction for the contribution.
- Only outright gifts are eligible. Distributions to charitable gift annuities, charitable remainder trusts, pooled income funds and other split-interest arrangements do not qualify for special tax treatment.
- Your distributions will count toward your Required Minimum Distribution (RMD).
- Qualified contributions are not subject to the deductibility ceiling (50% of Adjusted
Gross Income [AGI]) or any “haircut” on itemized deductions.
- Gifts from retirement accounts other than IRAs—such as 401k, 403b, and SEP
accounts—are not eligible. You may be able to make qualified transfers of money from other accounts to an IRA, and then make a charitable gift from your IRA. Please check with your tax adviser.
- Distributions to Supporting Organizations as described in IRC 509(a)(3) and Donor Advised Funds as described in IRC 4966(d)(2) are specifically excluded.
Charitable IRA gifts under the legislation are generally appropriate for donors who:
- Have a taxable estate and wish to avoid the potential “double taxation” (estate and income tax) owed on retirement assets distributed to a spouse or family member at death.
- Do not itemize deductions.
- Are subject to the Alternative Minimum Tax, or whose other tax deductions or
exemptions are phased out because of high income.
- Are required to take minimum distributions, but don’t need additional income.
- Intend to leave the balance of their IRA to charity at death.
Please contact Peter D'Orazio, Vice President of Institutional Advancement, if you would like more information about this opportunity. He can be reached at 610-565-1095, or email@example.com.
The Williamson Free School of Mechanical Trades does not provide legal or tax advice. We recommend that you seek your own legal and tax advice in connection with gift and planning matters. To ensure compliance with certain IRS requirements, we disclose to you that this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.