IRA Charitable Rollover

IRA Charitable Rollover Extended for 2013!

If you're age 70½ or older in 2013 -- or know someone who is -- we'd like to share news that can have a positive impact on individual income tax situations as well as Knox College!

The American Taxpayer Relief Act of 2012 extended the IRA Charitable Rollover for 2013, with special provisions that allow donors to make gifts that are retroactive for the 2012 tax year if they act before February 1, 2013.

During 2012, many donors wanted to use the IRA charitable rollover to make a gift to Knox or other organizations. They were unable to do so because Congress hadn't extended the rollover. As a result, these donors took their required minimum distribution knowing that they would have to pay tax on the distribution. For those who did, here is some good news! There are two ways donors can take advantage of the recent changes for their 2012 taxes:

1. The "Cash Gift Conversion" Method

Under a special rule included by Congress in the recent law, donors who received a distribution from their IRA between December 1, 2012 and December 31, 2012 can convert this taxable distribution into a charitable distribution by making a cash gift to charity by January 31, 2013. The IRS will treat the amount of the cash gift as if the donor had made a direct rollover to charity and the donor will avoid tax on the amount of the gift.

Example:  Helen Smith, Class of 1960, received her 2012 required minimum distribution from her IRA custodian in the amount of $25,000 on December 15, 2012. On January 7, 2013, Helen sends a check in the amount of $25,000 to Knox College. Helen's gift to Knox can now be considered a qualified charitable distribution from her IRA.

2. The "Retroactive Distribution" Method

The other special rule included in the new law allows donors to make a qualified charitable distribution from their IRA between January 1, 2013, and January 31, 2013, and still have that distribution treated as a distibution occuring in 2012.

Example: On January 9, 2013, Ben Jones, Class of 1958, instructs his IRA custodian to make a distribution of $100,000 from his IRA to be transferred to Knox for Alumni Hall. Ben's gift to Knox is considered to be a qualified charitable distribution for 2012 (and would cover his 2012 required minimum distribution as well).

For those donors who made a charitable distribution from their IRA in 2012 in hopes that Congress would extend the IRA Charitable Rollover, you made the right call! Distributions made from IRAs directly to qualified organizations like Knox can be considered qualified charitable distributions.

Donors who want to stay ahead of any future changes in the tax code can take advantage of the IRA Charitable Rollover for 2013 by making their qualified charitable distribution now -- it's never too early to act on your gift planning options!

Because these changes may impact your future plans, we recommend that you take this opportunity to talk with your tax and estate planning advisor. 

Please also let us know how we can be of assistance with your charitable gift planning. If you have questions, e-mail Bob King, senior director of gift planning, or call him at 309-341-7459 or toll-free at 888-566-9265.