IRA Charitable Rollover Basics from Austin Estate Planning Lawyer Liz Nielsen

IRA Charitable Rollover

The IRA charitable rollover provisions provide an important giving opportunity for retirees who are charitably inclined.  This is particularly following the recently passed Tax Cuts and Jobs Act of 2017 (the “Tax Act”).  Because the Tax Act will significantly reduce the number of taxpayers who itemize, and so fewer taxpayers will benefit from a charitable deduction for annual giving.  However, the IRA charitable rollover provisions allow some retirees to receive a tax benefit for their generosity, regardless of whether they itemize deductions or not.

The Protecting Americans from Tax Hikes (PATH) Act of 2015 made permanent the charitable rollover provisions.    The IRA charitable rollover provisions allow taxpayers who are over 70 1/2 to exclude up to $100,000 from gross income for “qualified charitable contributions” from an IRA.

The basic requirements are:

  • You must be 70 ½ to take advantage of the IRA rollover;
  • The amount cannot exceed $100,000
  • Must be completed before year end;
  • Must be from a traditional IRA;
  • Must be a direct transfer to charity; and
  • Cannot be made to a donor advised fund or private foundation.

Making a charitable gift through the IRA charitable rollover provisions has two main advantages.  First, the distribution counts toward satisfying the individual’s required minimum distribution for the year.  Second, the distribution is excluded from the taxpayer’s income.

So, for any retiree that is 70 ½ or older, owns an IRA subject to required minimum distributions, and is charitably inclined, an IRA charitable rollover allows the donor to preserve an income-tax-reducing charitable deduction under the new tax law. These distributions aren’t included in income, and it is irrelevant whether the donor itemizes deductions.

If you are considering making an IRA charitable rollover, it is important that you work with advisors who have experience in charitable planning.  We’re happy to talk through your options with you so that you can make your charitable giving as effective as possible.

Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area.  For more information and to learn about our firm, please contact us.