IRA Charitable Rollover

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IRA Charitable Rollover

On December 18, Congress passed the PATH Act, which renews and makes permanent the Charitable IRA provision of 2006, making it easier for Americans to give to causes they care about. This provision has the power to help local charities strengthen their communities by allowing individuals to roll over up to $100,000 annually from an Individual Retirement Account (IRA) to charity without being federally taxed.

“It is a win-win—for people who would rather give to charity than pay taxes and for the nonprofit organizations they choose to support,” said Davette B. Swiney, Central Kentucky Community Foundation President/CEO.

Millions of Americans continue to save pre-tax dollars in their IRAs. The law allows taxpayers 70 ½ and older to share their wealth by giving retirement savings directly to charity—and bypassing income tax.

This law is important to increase our local capacity through philanthropy to continue to build community and improve social service programs that benefit people every day.

Annually, holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000. Individuals may exclude the amount distributed directly to an eligible charity from their gross income. Central Kentucky Community Foundation can help donors execute the transfer and direct their gift to the benefit of organizations or charitable causes they wish to support through several charitable fund options.

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. Charitable people 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,” Swiney said. “Experts estimate heirs may receive less than 50% of IRA assets that pass through estates.” A provision in the federal law extends this special option: transferring IRA assets directly to charity. By going directly to a qualified public charity, the money is not included in the IRA owner’s income and—most important—is not taxed, preserving the full amount for charitable purposes.

“This really is a powerful opportunity,” said Swiney. “For anyone interested in establishing a permanent legacy in this community, this is a chance of a lifetime to make the gift of a lifetime.”

For more information, call CKCF at 270-737-8393.