Uncertainty Among Charitable IRA Rollovers

As of now, it remains uncertain whether Congress will extend the IRA charitable rollover tax break for 2014.  For those 70 ½ and older with an Individual Retirement Account, the IRA charitable rollover is an attractive tax-wise giving strategy.  With it, you are able to direct the custodian of your pretax IRA to transfer up to $100,000 per year to a public charity without having to count that distribution in your income.  In return, you will relinquish the charitable income tax deduction. 

While Congress hashes out a funding bill to keep the government open and determine the fate of IRA charitable rollover provisions, a one-year extension is good through December 31, 2014 and a two-year extension is good through December 31, 2015. 

H.R. 5806 would make all three charitable provisions permanent.  “By making these bipartisan charitable tax incentives permanent, Congress has the opportunity to multiply the millions of individual acts of generosity happening across the country and make those contributions permanent.” 

Meanwhile, donors can “plan in the fog,” where non-itemizers can make charitable gifts directly from their IRAs to charity.  If the law is extended retroactively, the non-itemizers will not be taxed on the distributions up to the $100,000 limit.  If the law is not extended retroactively, they will be taxed on the distribution as usual.  “Non-itemizers have nothing to lose and the equivalent of a charitable deduction to gain if the law is extended.”

See Ashlea Ebeling, Dreaming Of A Charitable IRA Rollover, Forbes, Dec. 10, 2014.