Tax-free gifts from IRAs re-authorized
From the Binghamton University Foundation
Congress has re-authorized legislation that allows donors to make charitable gifts from their IRA accounts during tax year 2009 without incurring income tax on the withdrawal. If you are age 70½ or older and are required to take minimum withdrawals and you do not need them for personal use, this may be a great way to make a gift to one or more qualified charities. While you cannot claim a charitable deduction for IRA gifts, you will not pay income tax on the amount.
* You must be age 70½ or older at the time of the gift.
* Transfers must be made from a traditional or Roth IRA account by your plan provider DIRECTLY to the charity. Funds that are withdrawn by you and then contributed do NOT qualify.
* Gifts from 401k, 403b, SEP and other retirement plans do not qualify.
* Gifts must be outright. Distributions to donor-advised funds, supporting organizations, or life-income arrangements such as charitable remainder trusts and gift annuities are precluded.
Benefits--Qualified charitable distributions:
* Can total up to $100,000 in each tax year (if your spouse has a separate IRA account, you can each contribute up to $100,000 per tax year);
* Can be excluded from your gross income for federal income tax purposes on line 15a of Form 1040 (state charitable deductions vary, check with your financial advisor);
* Can be used to satisfy your Minimum Required Distribution (MRD);
* Are not subject to the 50 percent deductibility ceiling or the 2 percent rule.
Example: Suppose Mary has $500,000 in an IRA and because she is 70½ years old, she will be required to withdraw approximately $25,000 this year. And further, suppose that she also wants to contribute $20,000 to her favorite charity. She can authorize the administrator of her IRA to transfer $20,000 directly to her charity and $5,000 to herself. The $20,000 distributed will not be subject to federal tax and will be counted toward her annual Required Minimum Distribution.
PLEASE NOTE: This summary is for educational purposes and is not intended as legal or tax advice. Consult your own legal or tax advisor before making any decision based on this information.