The IRA Charitable Rollover is Now Permanent


The “Protecting Americans from Tax Hikes” Act (“PATH Act”) was passed on December 17, 2015.  This act made the IRA charitable rollover permanent.  This provision first became law in 2006, but only for that year.  It has been renewed every year since.  However, in typical Congressional manner it was usually not passed until late in the year – too late to help most IRA owners.

Now that the law is permanent, charitable organizations can coordinate their publicity throughout the year to encourage IRA owners who qualify to take advantage of this law.  Certainly churches and all faith-based organizations need to realize how they can benefit from this law. 

Here is how the IRA Charitable Rollover works:

  •  An individual must be at least 70½ at the time of the gift
  • The provision is only for IRA’s and not 401(k), 403(b) or other tax-deferred plans
  • Each individual can transfer up to a maximum of $100,000 per year
  • Only “public charities” under the Internal Revenue Code qualify
  • The distribution must be made ‘directly’ to the charity and not the IRA owner
  • The Taxpayer may not receive any goods or services in exchange for the gift.

The IRA owner does not get to deduct the gift as a charitable donation, however they do not have to report the distribution as income either.  The distribution can apply toward their required minimum distribution (RMD) as well.

Using this provision is not necessarily an advantage for all individuals.  Without elaboration, here are a list of people who will find the IRA charitable rollover most advantageous.

  • Generous donors who would like to exceed the limitation of 50% of their adjusted gross income (AGI)
  • Taxpayers who live in states that tax income based on a person’s AGI
  • Taxpayers who do not itemize save the gift amount from reported higher income 
  • High-Income taxpayers who may be phased out with certain deductions 
  • Those subject to the Alternative Minimum Tax may benefit from this provision

This may be a wonderful source of donations for your organization.  If you would like more information about this subject please check with us at The Carpenter’s Plan.