New law carries tax benefits for some who give from their IRAs to charity

On Dec. 18, President Obama signed legislation recently passed by Congress to permanently reauthorize the Charitable IRA Rollover. The law is retroactive to January 1, 2015.

What does this mean?

Donors age 70 ½ and older may transfer up to $100,000 from their Individual Retirement Accounts (IRAs) to a qualified public charity. The transfer will be made free of federal income tax and possibly free from state income tax, depending on the donor’s state of residence. The gift qualifies for the donor's required minimum distribution (RMD).

How does the IRA recipient benefit from making this type of donation?

Each year, IRA owners age 70½ and older must take a required minimum distribution (RMD). The distributions generally commence at age 71 and must be taken by the IRA owner no later than December 31 of each year. The Charitable IRA Rollover is limited to no more than $100,000, but it does qualify as a RMD. Normally, the RMD is treated as income to the IRA owner. When given directly to charity under this law, the rollover amount is not counted towards the IRA owner’s income for federal tax purposes. In some instances, it is not counted for state income tax purposes. Therefore, if the IRA owner must take the distribution but does not need the income, giving it to charity reduces the IRA owner’s overall income tax burden and allows him/her to support a favorite charity.

Can donors do a Charitable IRA Rollover into a donor advised fund and get the tax benefit?

While SVCF is a qualified public charity, a donor advised fund is not eligible to receive a gift from a Charitable IRA Rollover. There are several other options available if a donor wishes to make a gift to SVCF using a rollover:

Who should donors contact about making a gift from an IRA?

After consultation with a legal or tax professional to determine if this type of gift is appropriate for their circumstances, IRA owners wishing to make rollover contributions must go through the IRA custodian who is administering their IRAs. Most IRA custodians have forms on the company website that will permit the distribution to be made to the charity.

If you have questions about the information provided here, please contact donate@siliconvalleycf.org or call 650.450.5444.

SVCF is providing this information for educational purposes only, and it is not intended to be treated as legal or tax advice. As when making any donation, the donor should consult with a legal or tax professional prior to making the contribution.