As part of the “fiscal cliff” deal, Congress has resurrected a popular tax-law provision, known as the “IRA charitable rollover,” that had expired at the end of 2011. This time-sensitive provision offers a special tax break to many investors. If you are 70½ or older you can transfer as much as $100,000 a year from your individual retirement account (IRA) directly to a qualified charity without having to count any of that transfer as taxable income. The transfer needs to be done by January 31, 2013.
Here is how it works: Instead of taking money out of an IRA and sending it to a charity yourself, you can ask the custodian of the account to send a certain sum directly to a charity. Generally, annual minimum required distributions had to be taken by December 31 of that year. Under the circumstances, Congress carved out a compromise for 2012 donations. Unfortunately, it only applies to taxpayers who delayed taking their IRA distributions until December. This January Do-Over will treat withdrawals, up to $100,000 per taxpayer or $200,000 per couple, before the end of January, 2013 as an IRA Rollover gift for 2012. The sum going to charity will not be included in your adjusted gross income.
You should note that IRA funds donated this way cannot be used for contributions to donor-advised funds, supporting organizations or private non-operating foundations. Subject to those constraints, the money can go to any organization to which you can make a gift that would qualify as a charitable deduction on your tax return.
For additional details on the IRA charitable rollover provision, please consult your tax advisor. And, don’t forget, the deadline to take advantage of this one-time charitable giving opportunity is January 31, 2013!