Heckscher, Teillon, Terrill & Sager, P.C.
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On December 18, 2015, President Obama signed into law the “Protecting Americans from Tax Hikes Act of 2015” (the “PATH Act”). Included in the PATH Act is a permanent extension of Section 408(d)(8) of the Internal Revenue Code, commonly known as the “IRA Charitable Rollover” provision, which had expired on January 1, 2015.

The IRA Charitable Rollover provision permits an individual taxpayer who is at least 70 ½ years old to distribute up to $100,000 directly from the taxpayer’s individual retirement account (“IRA”) to a qualified public charity on a tax-free basis each taxable year. The PATH Act’s permanent extension of this provision applies to all such direct charitable distributions from an IRA occurring on or after January 1, 2015. However, the IRA Charitable Rollover provision does not apply to distributions to donor advised funds, private foundations and supporting organizations.

Such a direct gift from an IRA to charity will not be taxable income to the taxpayer, nor will the taxpayer receive a charitable deduction. In general, making a direct gift from an IRA to charity is more tax-efficient than withdrawing the funds from the IRA, recognizing the income, and then making a deductible charitable contribution. However, because each taxpayer’s situation is different, we recommend that you consult your accountant or income tax preparer to confirm that there would be a benefit to making a direct gift to charity.

In order to qualify as a tax-free distribution under the IRA Charitable Rollover provision, the charitable distributions should be made directly from the taxpayer’s IRA provider to the qualified public charity. The charitable distributions will be counted towards the taxpayer’s required minimum distribution for the same taxable year.

If you are at least 70 ½ years old and made direct charitable distributions from your IRA during the year 2015, you will not be taxed on the first $100,000 of such distributions. If you are at least 70 ½ years old and are considering making direct charitable distributions from your IRA in the future, you may do so without incurring tax on the first $100,000 of such distributions made during the applicable taxable year.