IRA Charitable Rollover Extended Through 2014
The extension of the IRA Charitable Rollover was finally passed by Congress and signed by the President. The IRA Charitable Rollover allows a donor who is at least 70½ years old to make a direct transfer from his or her IRA to charity, tax free. As a reminder, the well-known advantages of an IRA rollover are as follows:
- You can contribute up to $100,000 directly from your IRA, tax free.
- The charitable distribution can count toward your minimum required distribution for 2014.
- The distribution is not included in your adjusted gross income, so you can benefit even if you do not itemize deductions on your tax return.
- Your gift supports the students and the ministry of Wheaton College.
The law is applicable for distributions from IRAs directly to charity only for transfers made during 2014. Since IRA administrators often require several weeks to process rollover transactions, this does not leave much time to transfer funds before the end of the year. If you are interested in pursuing an IRA charitable rollover gift to Wheaton College, you should contact your administrator and inquire whether a gift directly from your IRA is still possible for this year.
It is hoped that Congress will act more quickly next year and will enact an IRA Charitable Rollover provision which will be permanent for future years. Please contact David Teune, Director, or Ruth Langworthy, Associate Director of Gift Planning, at 630-752-5332.
Deductibility of Charitable Gifts
If you itemize your deductions, making charitable gifts can play a significant role in reducing taxable income. However, there are rules which may limit your charitable deduction in a particular year. The American Taxpayer Relief Act of 2012 caps the itemized deductions for individuals earning more than $250,000 and married couples earning more than $300,000.
Cash gifts can be deducted up to 50% of adjusted gross income. Any excess may be carried over for five additional years until completely used.
Gifts of appreciated assets, such as securities and real estate (which have been held for longer than one year), can be deducted at full fair market value up to 30% of adjusted gross income. If the gift is made outright to charity, then the entire capital gain on the asset is avoided. Gifts that return income may have some capital gains ramifications. NOTE: The deduction for gifts of appreciated assets held for one year or less may be limited to your cost basis in the asset.
Gifts of tangible personal property, such as works of art or jewelry, can be deducted in amount equal to 30% of your adjusted gross income. In order to claim a full fair market value deduction, those assets must be used in relation to the charity’s mission. If such an asset is not used in a way related to the charity’s mission, you may only deduct your cost basis in the asset.
The current federal income tax rates range from 10% at the low end all the way to 39.6% at the highest level. State income rates are in addition to the federal rates quoted above.
Capital Gains Taxes
Generally, for investment assets held for longer than one year, the federal capital gains tax rates range from 0 to 20% depending on the regular tax bracket of the donor. State capital gains taxes are in addition to any federal taxes. For investment income above $200,000 (or $250,000 for a couple), there is an additional 3.8% "Obamacare" tax.