IRA IRA Rollover retirement

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Charitable IRA rollover is back for a limited time

President Obama signs extension of popular tax provision through December 31

December 22, 2014 | by Phillip Buchanan


Charitable IRA rollover is back for a limited time

On December 19, President Obama signed into law the Tax Increase Prevention Act of 2014 (H.R. 5771), which extends the charitable IRA rollover through December 31, 2014.

The provision allows IRA owners age 70 ½ or older to make a direct, tax-free transfer of up to $100,000 a year from their individual retirement account to a public charity like Duke University.

If you are 70 ½ or older, an IRA rollover can be especially attractive because:

  • It allows you to reduce your taxable income, and
  • The donation counts toward your annual required minimum distribution.
  • Plus, you can use retirement assets to make an immediate gift to a place you care about.

Here are the rules you need to know:

  • The charitable IRA rollover is only available for gifts from an IRA and not from any other type of retirement plan (e.g. 401(k), 403(b), SEP, Keogh, ESOP, etc.). In some cases, a donor may transfer assets from another type of retirement account into an IRA in order to be able to make a tax-free IRA rollover to a charity.
  • It is only allowed for outright gifts to a qualified public charity like Duke University for which the donor receives no benefits. It is not allowed for a charitable remainder trust, lead trust, gift annuity, pooled income fund, donor advised fund, supporting organization, family foundation, etc.
  • It is only allowed for donors who are at least 70 ½ years of age on the date of the gift.
  • Charitable IRA rollovers are limited to no more than $100,000 in total during each year from the donor’s IRA or IRAs. 
  • There is no income realized and no income tax deduction for the donor making a charitable IRA rollover (unless the rollover is made from documented taxable contributions). This is more beneficial for most donors when compared to a taxable IRA distribution followed by a charitable deduction. The rollover eliminates issues related to the carryover of existing charitable deductions, results in no self-employment or Social Security taxes and, in most cases, no state income tax is applicable to the rollover.
  • The charitable IRA rollover should be directly transferred from the plan administrator (a.k.a. custodian or trustee) of the IRA to the charity (Duke University). The donor should not accept any distribution of funds intended for a charitable IRA rollover. It is generally advisable to direct the rollover well before year-end to allow for unexpected delays. 

A testamentary gift of an IRA to Duke may be more appropriate for those donors who do not have sufficient assets to comfortably consider a lifetime charitable IRA rollover. This can be done by naming Duke as a primary or contingent beneficiary of the IRA on a “beneficiary designation form” available from the IRA’s plan administrator. 

You can also download a sample letter to send to your plan administrator to direct a qualified charitable Distribution from an IRA to Duke University.

Contact us for questions or to notify us about your plans to make a charitable IRA rollover to Duke.

About the author

phil-buchanan-headshot

Phillip Buchanan Senior Philanthropic Counsel for Duke University

Phil is a veteran of development and gift planning who considers it a privilege to help good people celebrate the joy of giving. He serves as Duke’s senior philanthropic counsel and helps donors, professional advisors and Duke Development officers evaluate the best options for making a charitable gift to Duke. He has been featured in publications such as BusinessWeek and Kiplinger’s. When he’s not at work, Phil attempts to solve the mysteries of the universe for his three inquisitive young sons.

Phillip Buchanan can be contacted via email or by phone at (919) 681-0467.

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