With President Obama’s signing of the American Taxpayer Relief Act of 2012, the extension of the IRA charitable rollover through December 31, 2013, is official. The Marion Community Foundation says this is significant news in philanthropic circles and impacts local organizations and their donors.
“This legislation makes it easier for Americans to give to causes they care about,” said MCF president Brad Bebout. The Charitable IRA provision, first enacted in 2006, has the power to help local charities, such as Marion Community Foundation, strengthen and build community in an uncertain economy.
“Millions of Americans continue to save pre-tax dollars in individual retirement accounts (IRAs),” explained Bebout. “Thanks to regular investments and long-term returns, about $5 trillion is invested in IRAs. This legislation gives taxpayers 70 ½ and older another year to share the wealth by giving retirement savings directly to charity—and bypassing income tax.”
Additionally, the extension allows donors to make distributions directly to eligible charities before February 1, 2013, and elect to have such distributions treated as qualified charitable distributions in 2012. Recognizing that the extension of the IRA charitable rollover provision occurred in 2013, this change may be a particular benefit to donors who would like to take advantage of the rollover in both 2012 and 2013.
“It is a win-win—for people who would rather give to charity than pay taxes,” said Bebout. 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, noted Bebout. 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 larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” Bebout said. “Experts estimate heirs may receive less than 50 percent of IRA 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 Marion 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. Another advantage is that charitable distributions can be used to meet annual minimum distributions required by law.
Holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000 per year. Marion 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 is a limited-time offer: the window is open now, but only for another year,” said Bebout. “For anyone interested in establishing a permanent legacy in this community, this is the opportunity of a lifetime to make the gift of a lifetime.
”Through philanthropic services, strategic grantmaking and community leadership, Marion Community Foundation helps people support the causes they care about, now and for generations to come.”
“Be sure to talk with your tax advisor,” said Bebout. “We would be happy to meet with donors and their tax advisors to help them take advantage of this opportunity.”
Marion Community Foundation is located at 504 S. State Street. Office hours are 9 a.m. to 5 p.m. weekdays. The office may be reached by calling 387-9704. Additional information is available online at marioncommunityfoundation.org.
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