IRA Charitable Rollover Made Permanent
December 26, 2015
The $100,000 IRA charitable rollover provision has been made permanent for qualifying persons and for certain individuals as may be very attractive. It only applies, however, to persons who are 70 1/2 years of age or older, and only for taxable distributions from an IRA account. Further, it must be made to a qualifying public charity and not a private foundation nor to a donor advised fund administered by a public charity (Drat!). It does, however, count towards fulfilling the taxpayer's required minimum distribution for the year in which it is made.
Now of course you can always take the money out and then give it to the charity, but that actually raises your tax because of all of the different floors, ceilings, and recalculations of taxes that go into a typical form 1040. Despite seemingly having the same economic result, you pay more tax if you take the money out and contribute to charity that if the charitable donation were to go directly from your IRA. I tried it out on my own projected sample tax return and it appears that I would pay an extra sixty-two dollars in tax for withdrawing one thousand dollars from an IRA and contributing it to a charity, whereas if I were a little older and otherwise qualified, there would be no tax effect from making the IRA distribute directly to the charity.
But like pretty much everything involving tax, there is a good more detail to it, and if you are going to advise your clients (or rely upon it yourself) you'll want to know all of the requirements to make sure that it works for them or you, particularly if you have someone for whom this is advantageous for the year 2015, which is rapidly drawing to a close.
Courtesy of Steven Leimberg and Richard Fox, I am attaching a copy of Richard Foxs analysis from Leimberg Information Services enewsletter that describes how the new rule works and clearly spells out what you can and cannot do. For those of you who are not familiar with Steve's Information Services, he provides by email the most up to date and useful information on current events, rulings, cases and other developments on Estate Planning, Employee Benefits and Retirement Planning, Business Entities, Asset Protection Planning, Financial Planning and Charitable Planning Newsletters. Dollar for dollar his service is the best available resource to keep up to date on what's happening. You can check it out at www.leimbergservices.com.
Happy Year End!
Bob Wolf, Moderator, P & T Hot Tip Email List
Tener, Van Kirk, Wolf & Moore, P.C.
One Oxford Centre, Suite 2100
301 Grant Street
Pittsburgh, PA 15219
Fax (412) 281-6115
Any tax advice in the foregoing message was not intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties that may be imposed with respect to the matters addressed. Some of that advice may have been written to support the promotion or marketing of the transactions or matters addressed within the meaning of IRS Circular 230, in which case, be advised that the advice was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and you should seek advice based on your particular circumstances from an independent tax advisor.
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