Charitable IRA Rollover
Donor Fact Sheet

Donate Directly From Your Traditional or Roth IRA!

Are you 70 ½ years or older, or do you handle financial matters for an older relative or loved one?  If so, you need to know that The Pension Reform Act of 2006 provides tax incentives for donors age 70 ½ years who use IRA funds to make charitable gifts by December 31, 2007.

Taxpayers age 70 ½ years are required to take annual distributions from their IRAs.  The distributions are taxed along with other sources of income.  The Charitable IRA Rollover permits taxpayers to transfer gifts directly from their IRA to the charity – without including it as income and without paying taxes on the total amount of the gifts.
 

Who Benefits from the IRA Charitable Rollover?

• Taxpayers who don’t itemize their deductions

  • Nearly two-thirds of Americans do not itemize deductions on their annual income tax returns.  Therefore they do not receive a tax benefit for their charitable contributions.  Non-itemizers include lower and middle income taxpayers – as well as an estimated 5.2 million higher-income individuals. 
     

• Itemizing taxpayers who’ve reached the charitable giving limit

  • Donors who itemize can only deduct 50% of their adjusted gross income.  But donations from IRAs are excluded from this limit – allowing donors who have reached the 50% threshold to give more.
     

• Taxpayers whose deductions go down as their income goes up

  • By making donations from an IRA (rather than taking a distribution that qualifies as income) taxpayers can keep their income down and possibly qualify for other tax deductions.
     

What are the details?

• Donors must be 70 ½ years or older.

• Gifts must be made no later than December 31, 2007.  It is not yet known if the law will be extended beyond 2007.

• Donors can contribute up to $100,000 for 2007.  A couple with separate IRAs can each give up to $100,000.

• Gift must be made directly from the IRA to the charity and the organization must be a qualified charity (this includes United Way of Summit County).

• IRA rollover transfers cannot be made to charitable trusts, donor advised funds, foundations, supporting organizations or split interest vehicles such as remainder trusts.
   

Example of How the IRA Charitable Rollover Works
Betty is 75 years old and her mandatory annual distribution is $10,000, which is taxed along with other sources of income.  She wants to continue her annual gift of $4,000 to United Way of Summit County and has the choice of giving cash, appreciated stock or other assets.  Her tax advisor explained that she has another option to fund her pledge.  Betty can transfer $4,000 (or any amount up to $100,000) directly from her IRA to United Way of Summit County.  Under the IRA rollover provision, she avoids paying income tax on the amount that is transferred.  She will not, however, be able to use it as a charitable deduction.  But she will pay tax only on the remaining $6,000 and not the full $10,000 mandatory distribution.  This is a convenient and tax efficient way for Betty to continue to support United Way.
 

How to Make Gifts from your IRA
Simply call or write to your IRA office.  Click here to print a sample letter to use to request your transfer.  After your request has been received and processed, your IRA office will send a check to United Way on your behalf.  Also you can request that the check be mailed to you so you can forward the check, but the check itself must be made payable to United Way of Summit County.  The process is simple but keep in mind you may need 7 to 14 days “turn-around” time so don’t delay.  Give yourself, and your IRA office, plenty of time so your donation can be requested, processed and postmarked no later than December 31, 2007.
 

For More Information
We encourage you to consult with your financial and tax advisors in advance if you are considering the IRA Charitable Rollover provision.  And now is the time to act if you want to use IRA funds to make your annual gift.  For information contact Charlene Corlett at United Way of Summit County, 330.643.5537 or ccorlett@uwsummit.org