The charitable IRA rollover provision, which
expired at the end of last year, allowed IRA owners ages 70½ or older to donate
up to $100,000 of their IRA assets to a charity. The donor didn't receive a tax
deduction for the contribution. But he or she didn't have to report the IRA
withdrawal as taxable income, either. And the contribution could count toward
the annual required minimum distribution, or RMD, that people 70½ or older must
take from a traditional IRA.
While taxes are uncertain for
2013, you may be thinking Congress and the White House may retroactively extend
some “expired” taxpayer favorites. For example, one that expired in 2011 is the
ability to give the “required minimum distribution” (RMD) from your IRA to
But do not count on retroactive
resuscitation for this favorite in time for your 2012 taxes.
Until the end of 2011, as you
likely recall, it was possible for individuals over the age of 70 ½ to simply
rollover their RMDs from their IRAs straight into the waiting hands of their
favorite charity. As a result, this saved these taxpayers from any pesky
The Wall Street Journal took up this matter in a recent article
titled “Should You Wait on IRA Donations?”
According to the article, aside from benefiting charity, the benefit to seniors
making this savvy move include:
“By reducing your adjusted gross income, the tax provision
may help you keep it below the thresholds at which you could lose some of your
deductions and other tax benefits, or become subject to higher Medicare
premiums and taxes on your Social Security benefits.”
The verdict: it might not be
worth risking the wait on Congress and the White House to find out the official
ruling on charitable IRA distributions for 2012.
The article notes, however, that
even if you have to take the RMD and accept the taxable income, you can still
give it away and claim a charitable deduction. Although that’s not as
beneficial as the Charitable IRA rollover, it’s better than nothing and
certainly far better than inaction. Why? There’s an excise tax on the failure
to timely accept the full amount of your RMD.
Contact your Newport Beach, California Estate Planning Attorneys at Meier Law Firm to discuss estate planning for your family.
Reference: The Wall Street Journal (September 22, 2012) “Should You Wait on IRA Donations?”