IRA Rollover Law Now Permanent

Congress has passed, and the President has signed, the Protecting Americans from Tax Hikes Act of 2015, making permanent the law that allows IRA owners ages 70½ and older to make direct gifts to charity.

Eligible IRA owners can direct the custodians of their accounts to send checks up to $100,000 to charity. Although no income tax charitable deduction is available, the distribution is not subject to tax, as it would be if the IRA owner made a withdrawal and then gave the funds to charity. Qualified charitable distributions also satisfy required minimum distributions, providing tax savings.

Congress Encourages IRA Gifts by People Over Age 70½

The qualified charitable distribution allows people ages 70½ and older to instruct IRA trustees to make transfers to charity without incurring taxable income on those amounts.  Up to $100,000 per year can be given in this manner.

No income tax deductions are available for IRA gifts, but IRA donors can still save significant taxes.  In fact, making charitable contributions through your IRA can enable you to increase the size of your gifts absolutely free.

How Does the Law Let Me Increase My Gifts at No Cost?

IRA funds are heavily taxed whenever you draw them out, at rates as high as 39.6%. What’s more, the tax burden never goes away – even your heirs will pay income tax on IRA funds they receive from your estate, and federal estate taxes may apply, as well.

There is a satisfying alternative:  Instead of sending so much tax off to Washington, DC, you can divert the tax collector’s “take” from your IRA to us.

Suppose you ordinarily send us a check for $1,000 every year.  The table below shows that, instead of writing a check, you could instruct your IRA trustee to send us $1,333 (assuming you are in a 25% bracket). That $333 now can be used to advance our programs – and you will have increased your support by one-third, all paid for by the IRS.


Supercharge Your Support by Giving through Your IRA

If Your Anticipated Gift by Check Would Have Been:

 

$100

$500

$1,000

$5,000

$10,000

Your Highest Tax Bracket

You Can Increase to This Amount for Free by Giving through Your IRA*

15%

$117

$588

$1,176

$5,882

$11,764

25

133

666

1,333

6,666

13,333

28

139

694

1,390

6,944

13,888

33

149

746

1,490

7,462

14,925

35

153

769

1,538

7,692

15,384

39.6

166

828

1,656

8,278

16,556


*To calculate different IRA gift amounts than those shown, simply divide your normal gift amount by 1.0 minus your tax bracket. For example a person in the 28% bracket who usually gives $1,200 could give $1,200 ÷ .72, or $1,667, through an IRA at no additional cost. Donors who can “itemize” deductions for their gifts will have somewhat different tax results from those shown in the table, but may also reduce various penalties linked to a taxpayer’s adjusted gross income by substituting IRA gifts for cash contributions.



Gift Ideas with Your IRA

IRA Gift Rules

To make an IRA gift, just contact the trustee of your account. Please call our office if you plan to make a gift from your IRA so we can ensure proper transfer of your gift and provide the substantiation you’ll need.

IRA Gifts Have Special Appeal for:

Are You Too Young for IRA Giving?

For many years, advisers have been telling people that retirement accounts are the very best thing to leave to worthwhile organizations in their estate plans.  A combination of death taxes and state and federal income taxes can take 60% or more of the retirement accounts of many people at death, leaving little remaining for heirs.

People of any age can name us as partial or 100% death beneficiary of an IRA, 401(k) or 403(b) plan or other retirement account and avoid taxes.  You also can leave your retirement account to a trust that will pay income for life to a spouse or family member, with later benefit for our programs. Contact us for full details.


Copyright © R&R Newkirk. All rights reserved.

The materials contained on this website are intended only to show some ways by which you can make a charitable gift or bequest and thereby minimize federal tax liabilities, as authorized by the Internal Revenue Code. All examples are of a general nature only and should not be applied to your specific situation without first consulting your attorney or other advisers.