On the afternoon of December 17, 2010, the President signed into law The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This bill restores the IRA Charitable Rollover for 2010 and permits its use in all of 2011. The act is retroactive to January 1, 2010, so donors who previously made 2010 IRA rollovers will qualify.
A very important potential 2010 benefit exists. Because Congress recognized that it is very late in the year, individuals who choose to make a qualified charitable distribution (QCD) rollover from their IRA trustee to a charity may make their 2010 charitable gift during 2010 or in January of 2011.
There are several important points donors interested in this provision must be aware of:
- Individuals age 70 ½ and older may once again request direct transfers of funds from Individual Retirement Accounts (IRAs) to qualified public charities without income tax on gifted funds.
- The funds must be directly transferred from IRA accounts to the charities (donors should ask their IRA custodians for special forms to make these requests).
- Each individual is entitled to make a total of $100,000 in gifts to charities each year under this provision.
- 2010 IRA rollover gifts can be made through January 31, 2011.
- For those individuals who have not yet taken their IRA Required Minimum Distributions (RMDs) for 2010, they may partially or wholly satisfy that requirement through an IRA rollover gift made by January 31, 2011.
- These contributions do not qualify donors for an additional charitable income tax deduction as not being taxed on the withdrawal is worth even more than a standard charitable deduction.
- Only standard IRAs and Roth IRA accounts qualify under this law; other retirement accounts such as 401(k), 403(b), SEP, KEOGH, and SIMPLE IRA plans cannot be used to make an IRA rollover gift.
- Donors of IRA rollover gifts must receive no personal benefits from this gift nor are they available for planned gifts such as charitable remainder trusts or gift annuities.
The provision is a significant opportunity for you if:
- you hold assets in your IRA that you do not need;
- you would like to make a large one-time gift;
- you are subject to the 2% rule that reduces itemized deductions;
- you do not itemize; or
- you plan to leave part or all of your IRA to the IMF at death.