You Can Donate Directly from your Traditional or Roth IRA and Receive Tax Benefits
If you are age 70½ or older you need to know that the Pension Refor Act has been extended! This piece of legislation provides tax-incentives for donors at 70 1/2 years who use IRA funds to make charitable gifts now through December 2009.
Tax payers age 70 1/2 years are required to take annual distributions from their IRA's. The distributions are taxed along with other sources of income. The Pension Reform Act - Charitable IRA Rollover permits taxpayers to transfer gifts directly from their IRA to the charity - without including it as income and without paying taxes on the total amount of the gifts.
Who Can Benefit from the IRA Charitable Rollover?
- Taxpayers who don't itemize their deductions.
- Itemizing taxpayers who've reached the charitable giving limit - because donations from IRA's are excluded from income, donors are able to exceed the traditional 50% itemization limit for their adjusted gross income.
- Taxpayers whose deductions go down as their income goes up.
- A charitable gift made directly from your IRA to Children’s Cancer Research Fund as part or all of your Required Annual Distribution, will lower your reportable income and save taxes.
What are the Details?
- Donors must be 70 1/2 years or older.
- Gifts must be made no later than December 31, 2009.
- Donors can contribute up to $100,000 for 2008 and 2009. A couple with seperate IRAs can each give up to $100,000.
- Gifts must be made directly from the IRA to the charity and the organization must be a qualified charity (Children's Cancer Research Fund is a qualified charity).
- IRA rollover transfers cannot be made to charitable trusts, donor advised funds, foundations, supporting organizations or split interest vehicles such as remainer trusts.
Example: Rose is 80 years old and her mandatory annual IRA distribution is $10,000, which is taxed along with other sources of income. She wants to continue her annual gift of $5,000 to Children's Cancer Research Fund and has the choice of giving cash, appreciated stock or other assets. Her tax advisor explained that she has another option to fund her gift. Rose can transfer $5,000 (or any amount up to $100,000) directly from her IRA to Children's Cancer Research Fund.
Under the IRA rollover provision, she avoids paying income tax on the amount that is transferred. She will not, however, be able to use it as a charitable deduction. But she will pay tax only on the remaining $5,000 and not the full $10,000 mandatory distribution. This is a convenient and tax efficient way for Rose to continue to support Children's Cancer Research Fund.
How to make gifts from your IRA
Making gifts from your IRA is easy - just write (click here for sample PDF letter) or call your IRA office. After your request has been received and processed, your IRA office will send a check to Children's Cancer Research Fund on your behalf. Also, you can request that the check be mailed to you and you can forward the check to Children's Cancer Research Fund, but it is imperative that the check is made out directly to Children's Cancer Research Fund.
The process is simple, but it can take 7 to 14 days. Make sure you allocate the appropriate amount of time prior to the end of the year to maximize your tax savings.
Be sure to consult your professional advisor to determine how this provision may benefit both you and Children’s Cancer Research Fund. Contact Development at development@childrenscancer.org for more details.