New Tax Law Extends IRA Charitable Rollovers
The compromise tax bill, which has just been passed by Congress and signed into law by the President, extends until December 31, 2011 a provision allowing taxpayers age 70½ or older to use certain types of IRAs to make tax-free transfers of up to $100,000 per year to charities.
The law, which was originally enacted in 2006, expired at the end of last year, but it has now been renewed for two years, retroactive to January 1, 2010 and ending December 31, 2011.
Transfers within the allowable limit from a standard IRA or Roth IRA to one or more charities will not be included in the taxpayer’s taxable income, and they will count toward his or her required minimum distribution.
If you have not yet requested your required minimum distribution for 2010, and you would like to make a charitable gift with IRA funds, you should immediately take these actions:
• Reduce your required minimum distribution by the amount you would like to contribute to charity. (The non-charitable portion still must be taken by the end of this month.)
• No later than January 31, 2011 instruct the administrator of your IRA to transfer funds to the charities you choose (total transfers limited to $100,000), and advise the administrator that you intend to treat these transfers as if they were made in 2010. Because so little time remains here in 2010 after enactment of the law, taxpayers are given an additional month to make these transfers.
If you have already received your required minimum distribution for 2010, and you do not wish to make any further withdrawals from your IRA at this time, keep in mind that you can make a charitable transfer from your IRA at any point next year and have it count towards your 2011 required distributions.
You can authorize these transfers to any public charity, such as PeaceHealth St. Joseph Medical Center Foundation, but they may not be made to a private foundation, a donor advised fund, or a 509(a)(3) supporting organization.
*The full name of the new law is “Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010.”