By Christen C. Bruu, Esq.
Charitably minded IRA owners, age 70½ or older, interested in minimizing income taxes, can continue to take advantage of the IRA Charitable Rollover through December 31, 2009, thanks to the recently passed "bailout" legislation. While the Emergency Economic Stabilization Act of 2008, signed into law October 3, 2008, was not greeted by all with "thanks," certain individuals and the charities that will benefit were happy with at least this part of the legislation. The bill contains a two-year extension of the IRA Charitable Rollover that expired at the end of 2007.
The same rules will apply:
Rollover will satisfy required minimum distribution (RMD)
Income not recognized
No charitable deduction
Only up to $100,000 per year for 2008 and 2009
Distributions must be made directly from the IRA to the charity
"Charity" means a public charity or a private conduit foundation, not a donor-advised fund or private foundation
Generally, donors who itemize deductions and whose charitable contributions will be reduced by the percentage of income limitation or by itemized deduction reduction will benefit from making a qualified charitable distribution. The distribution from an IRA would be entirely excluded from an individual's income. Since the rollover gift is excluded from income, neither the percentage limitations nor the itemized deduction reduction rules apply, and the donor achieves a tax benefit. Donors who do not itemize their deductions will also benefit.
Donors will need to work with their professional advisors to determine the effect of the new rules on their specific tax situations to take advantage of the extension in 2008 and 2009.
Woods Oviatt Gilman LLP attorneys welcome the opportunity to discuss the new law with you and answer any questions.