Make Tax-Free Gifts From Your IRA: Getting Started

Under the extended charitable IRA legislation, if you are age 70½ or older, you can make charitable gifts now using funds from your individual retirement accounts (IRAs) without undesirable tax effects.

Previously you would have had to report any amount taken from your IRA as taxable income. You could then take a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income. In effect, this caused some donors to pay more in income taxes than they would have if they hadn’t made a gift at all.

Fortunately, now these IRA gifts can be accomplished simply and without tax complications. Plus, you can make the gifts now—while you are living and able to witness the benefits of your generosity. This unique opportunity expires at the end of 2013.


You may contribute funds this way if:

• You are age 70½ or older at the time of the gift.
• You made a gift of any amount up to $100,000 in 2012 or make a gift by Feb. 1, 2013, which may count retroactively for 2012.
• You make a gift of any amount up to $100,000 on or before Dec. 31, 2013, to qualify for 2013.
• You transfer funds directly from an IRA.¹
• You transfer the gifts outright to one or more qualified charities, but not to supporting organizations as defined under IRC 509(a)(3), or for charitable gift annuities, charitable trusts or benefactor advised funds.

Find more details on how you can use your IRA to make tax-smart gifts to us in our free guide.

Your Benefits

• The transfer generates neither taxable income nor a tax deduction, so you will receive the benefit even if you do not itemize your tax deductions.
• The transfer may count against your unsatisfied required minimum distribution for 2012 or 2013.
• You'll make an immediate impact on us, allowing you to witness the benefits of your generosity.

How the Extended Law Works
Pat, aged 80, has $450,000 in an IRA and has pledged to give us $75,000 this year. If Pat transfers $75,000 to us directly from the IRA, she will avoid paying income tax on that amount. She cannot, however, claim a charitable deduction—it is a pure wash. Pat has found an easy way to benefit us without tax complications. If Pat's spouse has an IRA and is 70½ or older, he can also give up to $100,000 tax-free to a qualified charity of his choice.

For More Information
It is wise to consult tax professionals if you are contemplating gifts under the extended law. Please feel free to contact Tim Enstice at 757-962-8213 or Legacy@peta.org with any questions. 

 

¹ Because this legislation was enacted in January 2013, a special transition rule allows individuals who took a distribution from their IRA in December 2012 to make a gift to a qualified charitable organization prior to Feb. 1, 2013, and treat that as a direct transfer.