Charitable IRA

Now it's easier than ever to make the gift of a lifetime with a charitable IRA.

For years, estate planners have recommended that retirement assets may be the most tax-effective asset in larger estates to distribute to charity. These assets are not only vulnerable to heavy taxation as part of an estate but also can be taxed again as income in respect to a decedent on the tax returns of heirs.

Until recent legislation, there was a disincentive for retirees to give IRAs to charity during their lifetimes because withdrawals from IRAs were subject to income tax - even those given to charity.

Tax law extension. Through 2011, retirement assets may become a preferred charitable gift forSseniors. IRA distributions to charity can now receive new tax advantages. Americans age 70 1/2 and up can make tax-free IRA contributions to public charities such as the Community Foundation for Southern Arizona.

Because this legislation comes so close to the end of 2010, qualified charitable contributions made from IRAs through January 31, 2011 can be applied for 2010 tax purposes.

How has the tax law changed?
The current law permits individuals to transfer up to $100,000 from individual retirement accounts directly to a qualifying charity without recognizing the assets transferred as income for federal tax purposes. In tax years through 2011, a donor who has reached age 70 1/2 is now allowed to exclude from his or her income tax calculations certain IRA withdrawals. In most circumstances, these charitable contributions are not tax deductible unless the retirement accounts were funded with after-tax dollars. This provision is time-limited. It applies to qualifying charitable IRA distributions made in 2010 and 2011.

Download a PDF version of IRA Charitable Rollover Fact Sheet (December 17, 2010).

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