Giving Gets Easier: IRA Charitable Rollover Now Permanent
It's official: the IRA Charitable Rollover has been signed into permanent law, and it's now possible for taxpayers to realize significant tax benefits by transferring funds from an Individual Retirement Account directly to qualified beneficiaries, including UC Davis School of Law.
The IRA Charitable Rollover is a tax provision that allows taxpayers to distribute up to $100,000 from an IRA to a qualifying charity without paying taxes on that amount. Taxpayers must be at least 70.5 years old-the age at which minimum distribution requirements for IRAs begin-and only contributions to public charities are eligible. First enacted in 2006, the law was initially set to expire in 2008, and though the law was subsequently extended in two-year intervals, uncertainty regarding the deduction prevailed until it was finally made permanent in December 2015.
The law may be of particular benefit to taxpayers who do not itemize their income taxes. Instead, these taxpayers take the standard deduction and thus receive no tax benefit from their charitable contributions. Previously, those individuals would have had to report their entire minimum required distribution as taxable income. Now, depending upon a person's circumstances, that contribution could be tax-free if the individual chooses to transfer the funds to a qualifying charity.
The IRA Charitable Rollover may also provide benefits to taxpayers who itemize. Although such taxpayers cannot claim a charitable deduction for tax-free distributions from their IRAs, the rollover contribution need not be counted as income, and may be useful to those seeking to keep their taxable income below a certain level in order to avoid additional taxes.
"The decision by Congress to extend permanently the tax provision for tax-free charitable rollovers is good news for taxpayers," says Professor Dennis Ventry of UC Davis School of Law, an expert in tax policy. "It provides certainty of treatment for both donors and charities alike. In so doing, it represents a reliable and valuable tool for financial planning purposes, and it offers donors a readymade source of giving to charities and institutions that they would like to support, including, it is worth pointing out, the School of Law."
As with any tax strategy, an IRA Charitable Rollover gift should be discussed with a qualified financial advisor. If you would like to learn more about making an IRA Charitable Rollover gift to UC Davis School of Law, please contact Nick Dolce, Director of Development: 530-752-1067 or [email protected].