What Will Congress Do with the Donation Rule?

The Donation Rule expired at the end of 2011 and Congress has not given any indication that it will be renewed. Under the previous rule, An IRA owner over 70 ½ could directly transfer IRA funds to a choice charity and wouldn’t have to report the donation as income. This capability could help IRA owners minimize income when distributions became mandatory.

Congress has been known to reinstitute expired tax code provisions and apply them retroactively, so maybe they will reinstate the old donation gift rule for gifts made in 2012. Even if Congress does not reinstitute the expired donation rule, any donation that your client makes from his/her IRA would be treated as a gift from any other source. The distribution would be included on the gifter’s tax return as an itemized deduction to offset income.

See Robert Blonik & William H. Byrnes, The IRA Charitable Donation: Its Just a Tax Deduction in 2012, AdvisorOne, Mar. 13, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.