News & Features

The IRA Charitable Rollover is back for 2012 and 2013!

On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 into law. The Act brings back the popular IRA charitable rollover provision wherein donors age 70½ or older are once again eligible to move up to $100,000 from their IRAs directly to qualified charities without having to pay income taxes on the money. This provision is retroactive to January 1, 2012. In addition, Congress recognized the issues with a late extension and provided two special transition rules:

Qualified distributions made by Feb. 1, 2013, may be counted retroactively for the 2012 tax year.

A taxpayer, who took a distribution from an IRA in December 2012, may make a contribution to a qualified charity before Feb. 1, 2013, and treat the gift as a direct transfer.

Some History

The charitable IRA rollover was first created as part of the Pension Protection Act of 2006 and was extended each year thereafter, however, not for 2012.  The Act retroactively extends the use of the charitable IRA rollover to distributions that occur from January 1, 2012 through December 31, 2013, so long as certain requirements are met.

What Are The Benefits?

Donors can transfer up to $100,000/year directly from a Traditional or Roth IRA to a qualified charity, including Vassar College, without paying income taxes on the funds transferred.

For those donors who do not itemize deductions, a gift from and IRA is excluded from reportable income, thus simplifying tax returns.

Direct transfers from an IRA can satisfy the IRS Required Minimum Distribution (RMD).

What Are the Rules?

Donors must be 70 ½ years old or older when making the qualified charitable distribution.

The distribution must go directly from a Traditional or Roth IRA to Vassar College (except as noted in the special condition noted above).

Contributions cannot be made from 401(k) or 403(b), however under certain circumstances, donors may choose to convert assets from a 401(k) or 403(b) into an IRA and then make a gift to the College.

Gifts cannot exceed $100,000 per taxpayer, per year.

Gifts must be outright (not to a donor-advised fund, support organization, charitable trust, or charitable gift annuity).

Gifts must be made between January 1, 2012 and December 31, 2013.

2012? – It May Not Be Too Late

Some donors may still be able to benefit from the charitable IRA rollover provision for 2012. 

Donors who had anticipated the possible renewal of this legislation or preferred to simplify bookkeeping and directed their IRA custodian to make a transfer directly to Vassar sometime in 2012, have made an IRA rollover gift that meets the requirements for a qualified charitable distribution.

Donors who received IRA distributions after November 30, 2012 but before January 1, 2013 who make a gift of an equivalent amount in cash to Vassar before February 1, 2013, may treat the transaction as a 2012 qualified charitable distribution and if applicable, their 2012 Required Minimum Distribution

Donors who turned 70 ½ in 2012 and who have yet to take their 2012 Required Minimum Distribution (the deadline is April 1), may make a qualified charitable distribution before February 1, 2013.

Additionally, Donors who desire to reduce an IRA balance (and thus the 2013 Required Minimum Distribution amount) can still make a 2012 qualified charitable distribution even if they have already taken a 2012 RMD, so long as the quailed distribution is made before February 1, 2013. 

Posted Friday, January 4, 2013