IRA Charitable Rollovers As Authorized Under The Protecting Americans from Tax Hikes Act of 2015
The IRA Charitable Rollover provision is now permanent as provided for in The Protecting Americans from Tax Hikes Act of 2015. The Tax Act of 2015 made the charitable rollover provision permanent for 2016 and beyond using the rules established under the Pension Protection Act of 2006 for qualified charitable distributions from IRA accounts. Those rules allow individuals age 70 ½ or older to exclude from their taxable income certain direct transfers from traditional and Roth individual retirement accounts (IRA) made to public charities as outlined below.
Direct qualified charitable distributions or transfers from IRA accounts made in tax/calendar year 2016 and postmarked on/or before December 31 qualify for federal income tax favored treatment. The Act extended the charitable rollover provision permanently for 2016 and subsequent tax/calendar years.
Qualifying IRA transfers
- Must be made directly from an IRA administrator/custodian to a public charity.
- Donor must be age 70 ½ or older at the time of the transfer or gift.
- Gifts must be received by the charity or postmarked by December 31 of the given tax/calendar year.
- No quid pro quo gifts - a donor cannot receive any benefits or premiums in return for a gift.
- Gifts of up to a total of $100,000 per individual taxpayer per year are permitted.
Qualifying retirement accounts
- Traditional individual retirement accounts.
- Roth individual retirement accounts open for five or more years.
Excluded gifts under the act
- Income-retained gifts - charitable gift annuities, charitable remainder trusts and pooled income fund arrangements.
- Donor advised funds.
- Supporting organizations.
- Private foundations.
Excluded retirement accounts
- SIMPLE SEP
- Inherited IRAs - the IRA charitable rollover rules apply to inherited individual retirement accounts as long as the owner/beneficiary is age 70 ½ at the time the gift to charity is made.
- A charitable IRA rollover can count toward a donor's annual IRA minimum required distribution.
- No income tax deductions are permitted for qualified charitable distributions, as these distributions are not included in a donor's income for federal income tax purposes.
- Donors cannot take possession of IRA distributions as part of the gift process and qualify for special tax treatment under the IRA charitable rollover provision. W&L recommends donors directly transfer their gifts from retirement accounts to Washington and Lee, and other qualifying charities.
- The IRA charitable rollover exemption applies to federal income taxation only - state and local tax laws may or may not follow the federal rules.
For many donors, designating Washington and Lee as a recipient of IRA assets (or other qualified retirement plans) through standard beneficiary designations remains an excellent philanthropic alternative. Retirement plans assets can place high tax burdens on estates.
Washington and Lee University recommends that potential donors consult their legal and tax advisers about this and other gift planning options before taking action. This summary does not represent financial, tax or legal professional advice.
January 8, 2016
Prepared by the Washington and Lee University Office of Gift Planning.
Margie Lippard - 540-458-8902 or firstname.lastname@example.org
Washington and Lee University
204 West Washington Street
Lexington, Virginia 24450