IRA Charitable Rollover
Extended for
2008 and 2009
On October 3, 2008 Congress passed, and the President signed, H.R. 1424, the Emergency Economic Stabilization Act of 2008, which includes an extension of the IRA Charitable Rollover. The extension is retroactive, applying to distributions made throughout 2008 and 2009.
What is the IRA Charitable Rollover?
Taxpayers age 70½ and older are required to make annual distributions from their Individual Retirement Accounts (IRAs). The distributions are included in the taxpayers’ adjusted gross income (AGI), and taxpayers pay taxes on them. The IRA Charitable Rollover permits taxpayers to make donations directly to qualified charitable organizations such as Crowley’s Ridge College from their IRAs or Roth IRAs without counting them as part of their AGI and, consequently, without paying federal or state income taxes on them.
IRA rollover gift considerations:
1. This rollover giving opportunity applies only to individuals age 70½ or older. To qualify for this rollover opportunity you must have attained this age before directing the distribution to CRC.
2. This rollover opportunity applies exclusively to traditional IRAs and Roth IRAs. Other retirement plans such as 401(k)s, Keoghs etc. are not eligible. In some instances, it may be possible to roll other retirement plan assets into an IRA and still take advantage of this giving opportunity. However, it is very important to note that ultimately these distributions must come from IRA accounts to qualify.
3. These IRA rollovers to CRC may be for any gift amount up to $100,000 per individual for the remainder of 2008, and also in 2009. A husband and wife can each give up to $100,000 in 2008 and again in 2009. An illustration of this would be a husband giving $25,000 from his IRA to CRC now and then giving $10,000 a few weeks later. This would be a total gift of $35,000 and still allow him to give an additional $65,000 to CRC before the end of the year. The wife could also give CRC up to $100,000 from her IRA during the same year.
4. To qualify, the rollover distributions must be made directly to a qualified charity, such as CRC. (CLICK HERE for a sample letter to an IRA administrator for this purpose.)
5. These distributions to charity will count towards an individual’s minimum required distribution requirement for the year. Many individuals will find that they can lower the tax burden by funding charitable contributions through IRA accounts during the next two years, and proportionally reducing or eliminating the required distributions that they take into income.
6. IRA distributions to fund split interest gifts such as charitable gift annuities and charitable remainder trusts are not eligible for IRA rollover gifts.
7. IRA rollover distributions are not deductible as charitable gifts. It is very important that donors do not receive any benefit or value from the charity as a result of these IRA gifts. Doing so would disqualify the gift from the special IRA rollover treatment.
8. It is very important that you inform CRC about your charitable IRA rollover contribution. Since the transfers will come directly from an IRA administrator, this communication will be necessary to ensure that CRC understands the origin of the gift. (CLICK HERE for a sample letter to help you notify CRC's president, Ken Hoppe, that you have been so kind as to make an IRA distribution gift to the college.)
Who might benefit from this opportunity?
The “charitable rollover” provides a new method for using certain IRAs in philanthropic and financial planning:
1. If the majority of your assets are in IRAs, it may be more convenient to make a direct transfer rather than reporting a withdrawal on your income tax return.
2. If you do not itemize your deductions, you may be able to make gifts from your IRA without increasing (and maybe even decrease) your adjusted gross income.
3. If you already give up to your 50% charitable deduction limit of your adjusted gross income, this legislation may allow you to, in effect, exceed that limit in 2008 and 2009.
4. If you have accrued a “carryover” of charitable deductions from past tax years, this legislation would allow you to make gifts without impacting those carryover amounts.
5. If your level of income causes a phase-out of certain deductions, a rollover may allow you to make gifts without increasing (and maybe even decrease) your adjusted gross income.
6. It may simply be easier to make a transfer from your IRA to charity and not need to worry about the income tax implications.
7. If you’ve been thinking about making a larger gift, this may provide a tax-advantaged time-frame for doing it.
8. In some states (check with your adviser) a charitable deduction is not allowed for state tax purposes. A rollover that does not increase your reportable income may result in savings on state taxes as well.
Note: Because everyone’s financial position is unique, it is important for donors to consult their tax counsel and plan administrators before making gifts to charity from their IRAs.
Richard Johnson, MNM, (CRC 84’)
Vice President for Advancement
Crowley's Ridge College
100 College Drive
Paragould, AR 72450
rjohnson@crowleysridgecollege.edu
Local: (870) 236-6901
Toll Free: (800) 264-1096
www.crowleysridgecollege.edu
