Note: The following discussion is provided for informational purposes only and is not intended to serve as legal or tax advice. For specific information about provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 affecting charitable contributions, consult your tax adviser or attorney.
Persons aged 70½ or older can again enjoy tax savings by making charitable gifts directly from their Individual Retirement Accounts (IRAs), thanks to a provision of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which was signed into law December 17, 2010. The act also allows charitable distributions made from an IRA in January 2011 to be declared as 2010 gifts, should the IRA holder wish to do so.
The December 17, 2010, law extends legislation originally adopted in 2006 and extended in 2008 (that extension expired December 31, 2009). For a charitable gift made from an Individual Retirement Account (IRA) not to be taxed as income, the following must be true:
- the gift was made in 2010 or 2011;
- the IRA holder is age 70½ or older;
- the gift totals $100,000 or less each year;
- the charity that received the gift is eligible to receive tax-deductible contributions;
- the charity is not a section 509(a)(3) supporting organization; and
- the withdrawal goes directly from the IRA to the charity.
The donor does not need to itemize his or her taxes to benefit from the distribution. If the donor does itemize, however, he or she cannot also take the distribution as a deduction.
Opportunity for Charitable Organizations?
A December 28, 2010, Chronicle of Philanthropy blog entry questions whether the extension will have much impact on 2010 gifts. "Vaughn W. Henry, a Springfield, Ill., lawyer who specializes in planned gifts, says he doubts many donors will want to tap their accounts for a second time this year. He says he has already met with one such donor who has decided against using his IRA to make a gift in 2010 for that very reason."
The blog also notes, however, that the University of Alabama raised $700,000 after e-mailing donors about the new law. University fundraisers anticipate raising "substantially more" by January 31, after they send a direct-mail appeal.
Suzanne E. Coffman, January 2011
© 2011, GuideStar USA, Inc.
Suzanne Coffman is GuideStar's editorial director and editor of the GuideStar Newsletter.