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Tax Planning: Don't Forget about the IRA "Charitable Rollover"


As a reminder, the Qualified Charitable Distribution (QCD) provisions were reinstated through 2011 as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (PL 111-312).  The provision allows individuals age 70 or over to exclude from gross income up to $100,000 that is paid directly from their IRA (excluding SEP or SIMPLE IRAs) to a qualified charity.  The excluded amount can be used to satisfy any required minimum distributions (RMD) that the individual must otherwise receive from their IRAs.

To qualify for the tax break, the money must be transferred directly from the IRA to the charity.  This can be done by advising the IRA administrator to make the check out to the qualified charity. Making the mistake of taking the distribution from an IRA and then writing a personalized check to the charity will disqualify the deduction which may cause a tax liability on the entire distribution.   

No double dipping:  Electing a qualified charitable distribution will not allow an individual to both exclude the proceeds from their income as well as include it on Schedule A, "Charitable Deductions."  Only those charitable contributions or donations which are not directly transferred from your IRA can be included on your Schedule A.  But on the flip side, this can be an advantage to individuals who do not itemize and therefore couldn't deduct the amount on Schedule A (many individuals - often those who no longer have a mortgage, do not itemize and therefore can't typically deduct charitable contributions).

Making the distributions from an IRA could also be a smart estate planning tool.  It is typically more advantageous to inherit appreciated stock rather than IRA assets.  When someone inherits from an IRA, they are typically required to take distributions and are taxed at ordinary income-tax rates.  But if someone inherits appreciated stock, they will receive a step-up in cost basis and will pay tax on the capital gains (currently at a lower rate than the ordinary income rate).   

As of the publication of this "Advisor Alert," Qualified Charitable Deductions have not been reinstated for future years.  2011 is the last year individuals can use this tool.  However, Sen. Chuck Schumer (D-NY) has introduced the Public Good IRA Rollover Act of 2011 (S.557).  The legislation would make permanent and expand the IRA charitable rollover, lifting the $100,000 charitable gift limit and allowing for certain giving, like to Charitable Remainder Trust, to begin as early as age 59 .  The legislation has so far attracted 10 additional co-sponsors, including lead Republican co-sponsor Sen. Olympia Snowe (R-ME).

If you have any questions regarding this opportunity, feel free to contact Michael D. Napier, CFP, Director of Financial Planning at (513) 745-0707 or by email at

Also, please see IRS Publication 590 for complete details.


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This information has been taken from sources we believe to be reliable but there is no guarantee as to its accuracy. This material is not intended to present an opinion on legal or tax matters.