Qualified IRA Charitable Distribution Rule Extended Through 2011
On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which provides vital tax relief and investments in our workers that will create jobs and accelerate economic growth. The bill includes an extension of tax-free distributions from individual retirement plans for charitable purposes.
The two-year extension (through 2011), permits tax-free distributions to charity from an Individual Retirement Account up to $100,000 per taxpayer, per taxable year, for individuals 70½ years and older. It allows individuals to make charitable transfers during January of 2011 and treat them as if made during 2010.
Please note that IRS rules allow these distributions from Traditional IRAs and Roth IRAs, but not from SEP IRAs, SIMPLE IRAs or employer-sponsored retirement plans. Also, to receive tax-free treatment, your donation must be made to a qualified charity, which doesn't include certain types of charitable giving such as gifts to grant-making foundations, charitable gift annuities and donor-advised funds. If your charity qualifies, you can use your donation to meet your minimum distribution requirements.
How to Make a Tax-Free Donation
Your donation must be made directly from your IRA to the charity you select. If you make a qualified contribution to a charity for the 2010 or 2011 tax year, you'll see this contribution as a regular IRA distribution on your Form 1099-R. However, this doesn't mean that your distribution will be taxable; the IRS has introduced a procedure on Form 1040 for taxpayers who are eligible under the new law to exclude direct distributions to charities from their IRAs from being taxed.
To learn more, consult with your tax advisor or call 800 842-2776 to speak with a consultant.
The tax information contained herein (including any attachments) is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding any tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.