On December 16, the Senate passed a one year extension of the IRA charitable rollover retroactive to January 1, 2014. The President has signed the legislation into law.
The recent legislation creates a good opportunity if you are age 70 ½ or older, own an IRA, and intend to make charitable gifts this year.
If this describes you, you can now make distributions directly from your IRA to Saint Lawrence Seminary without the distributions being included in taxable income or being subject to withholding.
In addition, rollover gifts will count towards your 2014 required minimum distribution (RMD). Because of the RMD rule, some donors find they must withdraw (taxable) funds they don’t need from their IRA. For them, a tax-free way to use those funds to support their favorite charity is particularly attractive.
Without this “charitable rollover” provision, using IRA funds for a charitable contribution requires withdrawing money from your IRA and then contributing it. The amount withdrawn will be taxable, and the deduction for the contribution may or may not have offset the tax. By contrast, an IRA charitable rollover eliminates the guesswork. And for those who do not itemize their deductions, it allows you to receive the same benefit from your gift as those that do itemize.
Example: Suppose Jack has $500,000 in an IRA and would like to contribute $25,000 to Saint Lawrence Seminary this year. Jack can authorize the custodian of the IRA to transfer $25,000 to Saint Lawrence Seminary. He will not be subject to tax on the $25,000 distributed. (Jack does not deduct the $25,000 gift – by not paying tax on otherwise taxable income, he has already received his tax benefit.)
Making a charitable rollover gift from your IRA rather than other assets may be especially appropriate if:
- you do not itemize deductions,
- you would not be able to deduct all of your charitable contributions because of deduction limitations, or
- an increase in taxable income may negatively impact your ability to use other deductions.
Certain limitations apply to these non-taxable charitable distributions from an IRA:
- They cannot exceed $100,000 per person per year.
- They must be made to a public charity such as Saint Lawrence Seminary (not a private foundation), and they cannot be to a supporting organization or a donor advised fund.
- The gifts must be outright. For instance, they cannot be used to establish a gift annuity or fund a charitable remainder trust.
- No goods or services, such as tickets to an event, can be received in exchange for the contribution.
- Congress extended this giving opportunity only through the end of 2014.
Interested? Please contact us.
We would be pleased to discuss with you the benefits of making a charitable gift from your IRA or retirement funds to qualify for the 2014 IRA Rollover Extention. Contact Ann Boehnlein at 888-526-8100. Email: aboehnlein@stlawrence.edu