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New tax bill extends IRA charitable rollover

New tax bill extends IRA charitable rollover

Donors and Charities Win With New Tax Bill:

Provision Permits Tax-free Charitable Transfers from IRAs

IRS logoAs part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, legislators passed a two-year extension of Charitable IRA legislation, making it easier for Americans to give to causes they care about. The Charitable IRA provision, first enacted in 2006, has the power to help local charities strengthen their communities at a time when it is needed most. The extension goes through 2011.

Millions of Americans continue to save pre-tax dollars in individual retirement accounts (IRAs). Thanks to regular investments and long-term returns, an estimated $4.2 trillion is invested in IRAs. The new law allows taxpayers 70½ and older to share the wealth by giving retirement savings directly to charity—and bypassing income tax.
This new law is important to local charities that continue to build community in an uncertain economy. The tax benefit expires December 31, 2011.

“This is a win for qualified donors who can continue to give to our nonprofits from an IRA without realizing taxes on the distribution,” said Julia East, President and CEO of the Southwest Florida Community Foundation. “In the end, it’s also a win for the nonprofits because they can receive larger gifts. ”

Thanks to decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. Charitable individuals and couples have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which reduces the value of the gift. Others are concerned about designating their children as IRA beneficiaries, since that may draw unintended tax consequences.

“For many larger estates, an enormous portion of IRA wealth goes to estate taxes and to the income taxes of the beneficiaries,” Julia East said. “It has been estimated that heirs may receive less than 50% of an IRA’s assets that pass through estates. ”
A provision in the new federal law extends an option: transferring IRA assets directly to charity. By going directly to a qualified public charity such as the Southwest Florida Community Foundation, the money is not included in the IRA owner’s income and—most important—is not taxed, preserving the full amount for charitable purposes.

During 2010 and 2011 only, holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000 per year. A single person can transfer $200,000 free from federal tax; a married couple can transfer up to $400,000 free from federal tax from separate accounts. The Southwest Florida Community Foundation can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers.

“This really helps now, especially in light of our current economic problems, both nationally and locally, but donors may not have this option in another year,” said Julia East. “Now is a great time to make a gift of a lifetime—a permanent legacy that supports your community well into the future. ”

Call the Community Foundation office if you would like more information about this important gifting opportunity at 239-274-5900.

To download the Community Foundation’s IRA Charitable Rollover Kit, click here.

Southwest Florida Community Foundation
Southwest Florida Community Foundation

Our ambition is a more vibrant community that will continually address the evolving community needs in Lee, Collier, Charlotte, Hendry and Glades counties in Southwest Florida. We invite you to join our family and invest in the community with us!