Charitable IRA rollover has been made permanent

On December 18, 2015, President Obama signed into law the charitable IRA rollover for 2015 and future years.  

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. Donors can now consider using IRA rollover gifts to satisfy multi-year pledges to the Annual Fund, create or add to endowments, or support other charitable purposes at Duke.

An IRA rollover gift can be an easy and effective way to support your favorite charity.

Some of the benefits include:

  • You can reduce your taxable income.
  • 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’s the fine print:

  • Donors must be at least 70 ½ years of age on the date of the gift.
  • Up to $100,000 may be transferred during each calendar year from the donor’s IRA or IRAs.
  • The charitable IRA rollover only applies for gifts from an IRA and not from any other type of retirement plan (e.g. 401(k), 403(b), SEP, 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 transfers to a charitable remainder trust, lead trust, gift annuity, pooled income fund, donor advised fund, supporting organization, family foundation, etc.
  • There is no federal income realized and no income tax deduction for the donor making a charitable IRA rollover (unless the rollover is made from documented taxable contributions). Since a charitable IRA rollover does not result in higher adjusted gross income, it may eliminate the negative impact of higher income on existing charitable deductions, loss of deduction under the Pease Amendment (3% reduction of deductions), higher Medicare premiums, self-employment and Social Security taxes, and application of the Affordable Care Act’s 3.8% tax and other “high income” tax penalties.
  • Some states treat the charitable IRA rollover as income followed by a deduction and apply a state income tax treatment, but this varies state to state so please check with your advisors.
  • The charitable IRA rollover must be directly transferred from the plan administrator of the IRA to the charity. The donor should not accept any distribution of funds intended for a charitable IRA rollover.

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 (PDF) 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.

TAGS: Individual Retirement Account charitable IRA rollovers

About the author

Gift Planning

Duke University’s Office of Gift Planning specializes in charitable gift planning for estates, charitable trusts and annuities, and other complex current and future gift plans.

For more information, please contact the Duke University Office of Gift Planning.