Susan Ingmire, President, Ignite Philanthropy Advisors
Ready to step up your giving? In December 2015, President Barack Obama signed into law a permanent IRA Charitable Rollover provision, locking into the tax code a tax-advantaged avenue for older Americans to make charitable gifts of up to $100,000.
The legislation (H.R. 2029) cleared the House by a vote of 318-109 and the Senate by a vote of 65-33, signifying solid bipartisan support of the permanent use of IRA retirement funds as a charitable giving vehicle. President Obama signed the measure into law just a few hours after the Senate vote.
H.R. 2029 includes a number of important tax provisions, several of which affect charitable giving. Most notably, it retroactively reinstates the IRA Charitable Rollover provision (originally enacted into law in 2006) for all of 2015; and removes any expiration date on the provision, thereby permanently extending the Rollover into the future. This means you can use your IRA for good as you file your 2015 taxes and in future years.
According to Independent Sector*, the new law permanently extends the ability of individuals of at least 70 ½ years of age to exclude from gross income direct charitable distributions to qualified charities of up to $100,000 per year. Because distributions are not treated as taxable income, they are not eligible for a deduction on your personal income tax return. Independent Sector, along with 19 other influential national charities, lobbied to make this legislation a part of the permanent tax code, rather than an uncertain tax benefit requiring annual Congressional approval.
In keeping with the provisions approved by law in prior years, it is likely that contributions for 2015 can be made until April 15, 2016 to one or more qualified charities; although donations to community foundations may be excluded. Details of the legislation are still rolling out from the IRS, so check with your tax preparer on the advantages this option offers you. As you may know, the taxes on IRA distributions – particularly from your estate – are unfavorable.
Why not give during your lifetime? Just think of the impact for good you can make with up to $100,000 per year.
Please note: This article is not meant to provide legal or tax advice. Always consult your tax preparer before initiating any charitable gifts from assets in your estate and in particular, distributions from your IRA.
*Independent Sector is a leadership network for nonprofits, foundations, and corporations committed to advancing the common good. Its nonpartisan coalition collectively represents tens of thousands of organizations and individuals locally, nationally, and globally.