January 31 Deadline To Transfer IRA Funds To Charities And Have It Count For 2012
Richard Sills is a Partner in our Washington, D.C. office and Sarah Butters, Of Counsel is in our Jacksonville office
The American Taxpayer Relief Act of 2012 (the "Act") extends for two more years 2012 and 2013 a popular provision that enables an IRA owner to make gifts to charity directly from his or her IRA account without causing the distributions to be included in income. This provision was first created in 2006 but expired at the end of 2011.
As before, the rule applies only to IRA owners at least 70-1/2 years old, and permits transfers up to $100,000 per year in 2012 and 2013. Amounts transferred from the IRA to charity will count in satisfying the minimum required distribution for the applicable year. The transferee charity must be a publicly-supported charity not a supporting organization, a private foundation or a donor-advised fund.
For a variety of reasons, this often benefits the donor more than if he or she withdrew the money from the IRA, included it in his or her income and then made the charitable contribution.
But there's one problem: The Act didn't become law until January 2, 2013. How can it help you for 2012? The answer is that the Act permits IRA owners age 70-1/2 or older to treat transfers to qualified charities made by January 31, 2013 as if they were made by December 31, 2012. The donor must be 70-1/2 as of December 2012 to qualify. Transfers will count in determining whether donors have met required minimum distribution rules for 2012.
Here's how you can benefit from this rule if you act by January 31 and follow the required procedures:
If you waited until December 2012 to withdraw your RMD. Suppose you delayed taking your required minimum distribution (RMD) from your IRA until late in 2012, hoping the rule would be extended. When December came and Congress still hadn't made a decision, you finally concluded it was necessary to withdraw your RMD amount to avoid a penalty. If the withdrawal took place in December 2012, you (assuming the other qualifications are met) may give that money to a qualifying charity in January 2013 and have it treated as if it were a direct transfer in 2012. You won't get a tax deduction for 2013 as a result of this contribution, but you will be able to exclude the...
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