Possible Extension for Charitable IRA Rollovers

Congress could retroactively extend a tax break on charitable donations from individual retirement accounts that expired at the end of last year.  The provision would allow account owners and beneficiaries over the age of 70 ½ to donate up to $100,000 in IRA assets without reporting the withdrawal as taxable income, effectively getting a deduction for the gift.  For many who plan to give to charity, “this gets you the biggest bang for your buck.”

The charitable IRA provision may also aid taxpayers in avoiding or reducing taxes on Social Security benefits and avoid higher Medicare Parts B and D premiums, which kick in when adjusted gross income exceeds $85,000 for individuals and $170,000 for couples. 

Experts expect Congress to revive the provision, as it has several times in recent years.  “There is a history of retroactive extensions.  My bet is that it will probably pass,” says Ed Slott, an IRA expert. 

After enacting the charitable IRA rollover tax break for 2006 and 2007, Congress has extended it three times, each for two years.  Experts expect the same pattern will hold this year, though Congress seemed poised to pass only a one-year extension.  However, if Congress does not resurrect the tax break, IRA owners who itemize will still get a tax break in the form of a deduction.  IRA owners must take their RMDs by year’s end or face a 50 percent tax on the amount they should have withdrawn. 

See Anne Tergesen, Charitable IRA Rollovers Could Get Reprieve, The Wall Street Journal, Dec. 13, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.