Many may remember the IRA charitable rollover, first introduced in 2006, that allowed individuals age 70½ and older to transfer as much as $100,000 per year from their traditional IRAs directly to qualified charities without first paying income tax on the distributions. As an additional bonus, the “rollover” amounts counted toward the individual’s minimum annual distribution requirements. The provision expired at the end of 2011 and was not available for contributions in 2012, much to the dismay of charitable organizations and donors alike.
The good news is that the new fiscal cliff deal enacted January 1, revives the charitable IRA rollover and extends it through 2013. There is also a limited opportunity for some 2012 donations.
Just as before, an individual who is age 70½ or older may direct the IRA custodian to send up to $100,000 from his/her IRA to a qualified charity. The IRA owner will not include the amount as income, and will not pay income tax on the withdrawal (however, there is no charitable deduction for the taxpayer in this scenario). The amount sent to charity will count toward the taxpayer’s annual minimum required distributions that must be taken beginning at age 70½.
While this may seem irrelevant to individuals who hoped to make charitable gifts in 2012 and satisfy their minimum required IRA distributions (which had to be taken by Dec. 31 of that year), Congress carved out a compromise for 2012 donations. For taxpayers who delayed taking their IRA distributions until December 2012, if they act quickly and donate cash to a qualified charity between now and Jan. 31, 2013, they can have the donation count to satisfy all or part of their 2012 minimum required distribution.