The Charitable IRA Rollover Is Back, Briefly – What Should You Do?

Good news: the “Charitable IRA Rollover” is law once again.  Bad news: the law expires in less than two weeks.

shutterstock_139347128This week, the Senate passed H.R.5771, a bill that extends a number of tax breaks that expired at the end of 2013.  [UPDATE: The President signed H.R.5771 into law on December 19, 2014.]

One of the expired provisions that has been revived is the Charitable IRA Rollover, which permits taxpayers age 70 ½ or older to make charitable contributions from IRAs, up to $100,000 per year.  While a charitable deduction is not available, the distribution from the IRA – known as a “qualified charitable distribution” – is excluded from the taxpayer’s income.  Moreover, the distribution to charity counts toward the taxpayer’s required minimum distribution for the year.  The distribution must be made from the IRA directly to a qualified public charity.

The Charitable IRA Rollover, having expired December 31, 2013, has not been available to donors all year.  The problem with the newly revived Charitable IRA Rollover is that it expires on December 31, 2014 – less than two weeks away.

Many donors will have already taken their required minimum distribution, being so late in the year.  Is it worth doing anything at this point?

Here are some simple guidelines:

  • If you have already taken your required minimum distribution, you can’t retroactively qualify that distribution for the Charitable IRA Rollover. That being the case, ask yourself whether you have additional charitable gifts you would like to make this year.  If so, taking an additional qualified charitable distribution from your IRA, direct to charity, might make sense.
  •  If you have not yet taken your required minimum distribution, you’re in luck. You can take advantage of the Charitable IRA Rollover – but act fast.  You don’t have much time.
  • If you are one of the few who – despite knowing the law was not in place – made distributions directly to charity earlier this year before this law was passed, you are the luckiest. Your distribution to charity made in 2014 will retroactively be deemed to be a qualified charitable distribution.

With less than two weeks to act, time is short.  Congress had good intentions, but they did us no favors by only extending the Charitable IRA Rollover through the end of this year.

In all likelihood, few donors will be able to take advantage of it before the window closes once again on the Charitable IRA Rollover.  Let’s hope the new Congress acts long before next December to again extend this popular method for giving to charity.

Questions or comments? Contact me on Twitter @juanros.

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