On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008, which includes an extension of the IRA Charitable Rollover (Tax Extenders and Alternative Minimum Tax Relief Act of 2008, H.R. 1424). The extension is retroactive, applying to distributions made throughout both the 2008 and 2009 tax years. The extension will allow individuals 70 and older to donate up to $100,000 from their IRAs to charities tax-free. The provision expires in December of 2009, but offers new flexibility for giving right now.
Get a sample of the required letters for your plan administrator or for Feeding America [these files are WORD documents].
1. What is The IRA Charitable Rollover provision of the Emergency Economic Stabilization Act of 2008 (H.R. 1424)?
It is an extension of the Pension Protection Act of 2006 law signed by President Bush in August 2006, which allows up to $100,000 of tax-free distributions per year from IRAs for charitable purposes. The extension is retroactive, applying to distributions made throughout both 2008 and 2009 tax years.
2. Can I make a charitable donation with any of my retirement plans?
No. Under H.R. 1424, you may only make a charitable distribution from a traditional IRA or Roth IRA. Distributions from simple IRAs, 401(k)s, 403(b)s, as well as other retirement plans do not qualify. However, some of the non-eligible plans may allow you the opportunity to rollover those plans into an IRA qualified plan. You should consult with your plan administrator to determine if this option is available to you.
3. Can anyone make a charitable donation from their IRA qualified plan?
No. You must be at least 70½ years old by the date of the contribution to charity. This should not be confused with the rule that requires plan participants to begin receiving the required minimum distribution in the same year that they reach age 70½.
4. When does the IRA Charitable Rollover provision of the Emergency Economic Stabilization Act of 2008 (H.R. 1424) take effect?
The provision is retroactive and applies to distributions made throughout both the 2008 and 2009 tax years. It is set to expire again in December 2009.
5. How do I make a charitable donation from my IRA qualified plan?
You must ask your IRA plan administrator to transfer funds directly to the charity of your choice. Check with your administrator or tax advisor for more information.
6. Can I direct my IRA donation to a charitable gift annuity or charitable remainder trust?
No. Neither of these charitable gift arrangements qualifies under this new law.
7. Can I direct my IRA donation to a donor advised fund?
No. A donor advised fund does not qualify under this new law.
8. Will I qualify for a charitable deduction by making an IRA donation from my qualified plan to the charity of my choice?
No. You do not receive a tax deduction for making a charitable distribution from your IRA qualified plan, but those funds are transferred to the charity of your choice free from taxes.
9. What are the advantages of making an IRA donation from my qualified plan to the charity of my choice?
The advantages will vary by donor. In general, this new law allows individuals who are 70½ or older to make tax-free gifts to the charities of their choice using funds that would otherwise be subject to tax under mandatory withdrawal rules. As always, we strongly recommend that you consult your own financial or tax advisor to determine what is best for your personal situation.