Over age 70½?

IRA distributions rolled over to a charity in 2011 are tax-free up to $100,000

By age 70½, you must begin receiving distributions from your IRA account, whether you need them or not. However, thanks to the 2006 Pension Act, you can turn this into an opportunity to help improve the lives of those in need, right here in Mesa, by rolling your distribution over to Mesa United Way. Although the law was due to expire at the end of 2009, Congress extended it through Dec. 31, 2011.

Although that extension expired at the beginning of 2012, there is a bill in Congress to extend it through the current tax year. We'll keep you posted on its progress.

Under the proposed bill, you would be allowed to roll over your mandatory distribution amount, plus any additional amount desired up to $100,000, directly from your IRA custodian to a charity, without increasing your income. This is commonly called an “above the line” exclusion of income. By contrast, if you were to receive your mandatory distribution and then donate it to charity, it would be considered a normal tax deduction. Depending on your income level, the difference could result in considerable tax savings. Consult your tax advisor to learn how this law would affect you.

This is a great and easy way for philanthropic-minded people to fulfill their desire to help others. However, you must have your donations rolled over to Mesa United Way by Dec. 31, 2011 to take advantage of this opportunity.

Here are the FAQs about the IRA Rollover to Charity:

Who qualifies? Individuals who are age 70½ or older at the time of the contribution (you have to wait until your actual 70½ birthday to make the transfer).

How much can I transfer? $100,000 for 2011.

From what accounts can I make transfers? Transfers must come from your IRAs directly to the Mesa United Way. If you have retirement assets in a 401(k), 403(b) etc., you must first roll those funds into an IRA, and then you can direct the IRA provider to transfer the funds from the IRA directly to the Mesa United Way.

To what charities can I make gifts? Tax exempt organizations that are classified as 501(c)(3) charities, including the Mesa United Way, to which deductible contributions can be made.

Can I use the rollover to fund life-income gifts (charitable gift annuities, charitable remainder trusts, or pooled income funds)? No, these are not eligible.

Can I use the rollover to fund donor advised funds or supporting organizations? No, these are not eligible.

Can I use the rollover to support a particular purpose at the Mesa United Way? As with all other gifts, you can direct your IRA Charitable Rollover gift as you see fit.

How will the Mesa United Way count the gift? We will give you full credit for the entire gift amount.

What are the tax implications to me?

• Federal – You do not recognize the transfer to the Mesa United Way as income, provided it goes directly from the IRA provider to us. However, you are not entitled to an income tax charitable deduction for your gift.
• State – Each state has different laws, so you will need to consult with your own advisors. Some states have a state income tax and will include this transfer as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their state income tax on the federal income or federal tax paid. Still other states have no income tax at all.

Does this transfer qualify as my minimum required distribution? Once you reach age 70½, you are required to take minimum distributions from your retirement plans each year, according to a federal formula. IRA charitable rollovers count towards your minimum required distributions for the year.

How do I know if an IRA charitable rollover is right for me? You are at least age 70½ and

• You do not need the additional income necessitated by the minimum required distribution, OR 
• Your charitable gifts already equal 50% of your adjusted gross income, so you do not benefit from an income tax charitable deduction for additional gifts, OR

• You do not itemize deductions.

What is the procedure to execute an IRA charitable rollover? Time is limited, so contact your plan provider to learn their procedures. We also offer a sample letter you can send to your plan provider to initiate a rollover. Make sure that you contact us when you direct the rollover so we can look for the check from your plan provider.