The IRS has extended the IRA charitable rollover which applies to distributions through the 2013 tax year. If an individual has reached age 70 ½ at the time of the distribution, they are eligible for some significant tax benefits. At age 70 ½ you are required to take a minimum distribution from your IRA each year. However, with the extension of the charitable rollover, you can transfer your distribution to a qualified charitable organization tax-free.

There are some specific guidelines that must be followed in order to qualify for this favorable tax treatment:

  1. The transfer must come directly from your IRA to the charitable organization. The distribution cannot come from an individual. This is slightly different from the extension that was granted at the end of 2012. This gave individuals the ability to transfer distributions through March 31, 2013 from personal accounts with proof that the funds were coming from an earlier IRA distribution.
  2. An individual can transfer up to $100,000 for 2013.
  3. If an individual has retirement assets in a 401(k), 403(b) or other retirement account, the assets must first be transferred into an IRA, and then the transfer can be made from the IRA directly to a charitable organization.
  4. A transfer cannot be made to a donor advised fund or a supporting organization.
  5. The transfer is not recognized as income for federal tax purposes. However, each state has different tax laws, so individuals would need to talk to their financial advisor regarding the state laws regarding IRA distributions.
  6. The gift does NOT qualify as a charitable deduction for federal income tax purposes since the gift is excluded from taxable income. Again, please talk with a financial advisor regarding each individual state tax law.

Four reasons that you should consider an IRA rollover:

  1. You do not itemize deductions but make charitable gifts;
  2. You are subject to the limitation on itemized deductions;
  3. You are required to take a distribution from your IRA that you just don’t need;
  4. Your charitable gifts already equal 50% of your adjusted gross income.

Currently, there is no indication that the charitable rollover will be extended for the 2014 tax year. If you would like to transfer a distribution to your church or other organization, please contact your IRA advisor to assist in starting the process. The rollover must be initiated by December 31, 2013, in order to qualify.

If there are any questions regarding the IRA charitable rollover, feel free to call the General Treasurer/CFO Office at 317-774-3941.