New Tax Law Extends Benefits of IRA Charitable Transfers

An expired tax planning tool for IRA owners is back thanks to legislation enacted on December 17, 2010. Through 2011, Americans age 70.5 or older may make charitable transfers of otherwise taxable distributions from their traditional IRAs up to a total of $100,000 per taxpayer, per taxable year. So, rather than adding required distributions to their taxable income, qualified taxpayers can choose to donate those distributions to Heifer up to $100,000 per year.

Taxpayers were not able to make these tax-free transfers to charities in the 2010 tax year because the relevant tax Code provision expired at the end of 2009. However, since the legislation was enacted in late 2010, the new law permits IRA owners to make charitable transfers from their IRAs during January of 2011 as if they were made during 2010. These charitable transfers must be made directly from the IRA trustee to the charity and are not otherwise deductible.

Heifer strongly encourages potential donors to work with their professional tax advisors to determine the impact of this legislation on their particular situations before making any IRA charitable transfer.  This information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.