Charitable Gifts and Tax Savings

Did you know that earlier this month Congress passed legislation extending the IRA charitable rollover? The law includes many ways for you to use your IRA to make gifts to charity this year.

The federal tax legislation that passed over the new year brings back the popular ‘Charitable IRA Rollover’, where donors at least age 70½ can fulfill their pledges to St. Thomas and accomplish their philanthropic objectives while not incurring a tax liability for IRA distributions, even for their annual required minimum distribution (RMD).

Just as in the past, the distribution must be made directly from the IRA custodian or trustee to our church and selected charities.  (Most charities and religious institutions qualify as a recipient, but donor advised funds and private foundations do not.)

The limit is $100,000 per taxpayer per year, but this charitable contribution can include RMDs and can be used to fund pledges.  This law enables one to not include such distributions as income for purposes of the tax calculations.

One special and temporary rule was also added to this legislation enabling the taxpayer to recharacterize IRA distributions made in January 2013 as having been made on December 31, 2012.  This current year distribution may have a tax benefit on one’s 2012 tax return. 

Another similar rule that expires soon allows a taxpayer to treat an IRA distribution made in December to one’s self as a charitable distribution, if those funds are transferred to the charity before February 1, 2013.  (This is the lone exception to the requirement that the charitable transfer must originate from the IRA trustee or custodian.)

So, if the timing and circumstances are right, this provision can be available to certain taxpayers for both 2012 and 2013.

We can provide more information on these provisions, but you should consult with your tax advisor to determine this law’s applicability and if it makes sense for you.