Transition Rules for IRA Charitable Distributions

The American Taxpayer Relief Act of 2012 (“ATRA”) reinstated the rules for 2012 and 2013 that allow taxpayers who are at least age 70 1/2 to transfer, tax free, up to $100,000 to a qualified charity.

Under these rules, a taxpayers who is age 70- 1/2 or older can make tax-free distributions to a charity from an Individual Retirement Account (IRA) of up to $100,000 per year. These distributions aren’t subject to the charitable contribution percentage limits since they are neither included in gross income nor claimed as a deduction on the taxpayer’s return.

Since Congress did not pass this law until January 1, 2013 (for tax years 2012 and 2013) there are some short term transition rules. Under these transition rules, IRA owners who are age 70- 1/2 and older have until January 31, 2013, to make tax-free transfers to eligible charities and treat these transfers as if they were made on December 31, 2012. Additionally, eligible IRA owners who received a distribution in December of 2012 can transfer any portion of that distribution to a charitable organization by January 31, 2013, and treat it as made in 2012.

If you have any questions about making a tax free distribution before the end of January 2013 or through the remainder of this year, please do not hesitate to contact us.

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