It is not too late to make a charitable contribution up to $100,000 to a qualified public charity from your IRA if you are over 70 and 1/2 and currently withdraw Required Minimum Distributions. The American Taxpayer Relief Act (“the Act”) passed on January 1, 2013 reinstated this provision retroactively for 2012 and prospectively for 2013. The Act allows you to make a qualified charitable distribution from an IRA for 2012 if the transfer is completed before February 1, 2013; Also, after February 1, 2013 but before December 31, 2013, you can make another $100,000 contribution from an IRA to a public charity.
You may choose more than one public charity for lesser amounts as long as the total amount does not exceed $100,000 for each year. The charities selected must be qualified public charitable organizations as described under the IRS statutes and rules. You may not use any Donor Advised Fund or Gift Annuity; however, you may use a Designated Fund from a qualified Community Foundation.
If you elected the Required Minimum Distribution for 2012 before January 1, 2013, you can still take advantage of the 2012 charitable contribution provision by making a contribution of an equivalent amount to a qualified public charity before February 1, 2013, as long as it is cash and not stocks or other assets that have appreciated. If you failed to take the 2012 Required Minimum Distribution during 2012, you may take that distribution by January 31, 2013 to avoid any IRS penalties, provided it is directly rolled over to a qualified public charity.
Should you choose to take advantage of any of the above opportunities, you may not take an itemized charitable deduction on your 2012 or 2013 income tax return. However, the full amount you contribute to a qualified charity (of an otherwise taxable IRA distribution) will not be taxable income for that year. This effective reduction in taxable income will be more beneficial than a charitable deduction for most taxpayers, including those in the highest income tax brackets, who do not need sums from their Required Minimum Distributions for current living expenses.
If you have questions about this benefit under the American Taxpayer Relief Act or any of the Act’s other provisions and how it may impact you personally, please call our office to schedule an appointment with any lawyer in our Tax and Estate Planning Group. We will be happy to assist you.