Tax Free Gifts from IRA Accounts Re-authorized

How it Works

• IRA owners now can make “qualified charitable distributions” up to $100,000 per year from their IRAs.  The distributions to charity, which would otherwise be taxable, are excluded from gross income for federal tax purposes under this law.
• The exclusion applies to traditional and Roth IRAs.  Other retirement plans such as 401(k), 403(b), SEPs, and SIMPLE plans are not eligible.
• Donors must have reached age 70-½ by the date of contribution to qualify for this exclusion.
• The exclusion is in effect for 2010 and 2011 only. IRA owners can give up to $100,000 each year in 2010 and 2011.
• Because Congress acted so late in the year, individuals can complete an IRA charitable rollover through January 31, 2011 and still count it as a 2010 IRA charitable rollover.
• The charitable gift must be made directly from the IRA trustee/administrator to the charity.  If you accept a distribution and forward the funds to charity, the distribution will not qualify for the exclusion and will be considered taxable income. \
• The exclusion applies only to outright gifts from IRAs.  Charitable gift annuities, charitable remainder trusts, and other similar gift arrangements do not qualify.
• Charitable gifts from IRAs will not be eligible for a charitable income tax deduction.
• Qualified contributions may be counted toward the Minimum Required Distribution (MRD) for a donor’s IRA accounts.

Giving Opportunities to Consider

You may benefit the most from the new IRA gift rules if:

You do not itemize tax deductions;
Your charitable deductions have been maximized;
You do not need the additional income necessitated by your minimum required deduction;
You live in a state that does not allow charitable deductions; or
You are subject to the 2% rule that reduces your itemized deductions.
There are numerous other considerations to be weighed under this law, including if you have multiple IRAs, if you have nondeductible contributions, and the impact of state income taxes.  Please consult with your tax or financial advisor regarding your situation before making any gift.

For more information, please contact The ALS Association’s Office of Gift Planning toll-free at (888) 949-2577, extension 212, or via e-mail at giftplanning@alsa-national.org.

This information is not intended as tax or legal advice.  Please consult an attorney or professional advisor about your specific situation.