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IRA Charitable Rollover Update

Should You Use An IRA To Make Charitable Contributions In 2014?

For those awaiting an update on the legislation that used to allow tax-free donations from individual retirement accounts (IRAs) to University of Delaware, we have good news, bad news, and more good news.

The IRA charitable rollover option:

  • ✓ Was available to taxpayers 70½ and older.
  • ✓ Allowed taxpayers to donate up to $100,000 from their IRAs without incurring income tax on the distribution.
  • ✓ Expired December 31, 2013.

The Good News

The America Gives More Act (H.R.4719) would make the IRA charitable rollover permanent and make it apply retroactively. The bill passed in the U.S. House of Representatives by a strong, bi-partisan vote in July 2014.

The Bad News

The America Gives More Act is stalled in the Senate, and it seems unlikely that it will pass in its current form. So as the time for end-of-year giving approaches, it's still uncertain whether or not donors will receive the charitable deduction for IRA rollovers this year.

The Other Good News

For many donors, especially those who still need to take the required minimum distribution from their IRA this year, it makes sense to go ahead and use IRA assets to make a charitable gift in 2014—no matter what Congress decides. Here's why:
  • If the IRA charitable rollover is extended, then the donor will avoid income tax on their IRA distribution by having turned it into a charitable gift. Win!
  • If the provision is not extended, the donor can still arrange for the IRA distribution to be directly contributed to charity. And although the donation would not be exempt from income tax, it will qualify for an income tax charitable deduction. Still a win!

In Summary

Donors who need to take their required minimum distribution from their IRA for 2014 and who want to make a charitable gift of that amount can arrange for the distribution to be directly contributed to a charity. This should not have any adverse effects on the donor and may turn out to be extremely beneficial if Congress decides to extend the charitable rollover for 2014.

Stay tuned for further news.

Read more about giving through your retirement plan.

The material presented on this Planned Giving website is not offered as legal or tax advice.
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