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Thursday, January 14, 2016

IRA Charitable Rollover Is Now Permanent

 [Photo credit: Lending Memo]
Last month, President Obama signed the Protecting Americans from Tax Hikes (PATH) Act of 2015 into law. Included in this package of changes to tax code is a permanent inclusion of IRS Charitable Rollover. This giving incentive was allowed to expire in 2008, and has since been renewed temporarily five times; it most recently expired on January 1st, 2015, leading to uncertainty for its status in 2016 and beyond.

The IRA Charitable Rollover allows individuals who are 70 1/2 years old to donate up to $100,000 to charitable organizations directly from their IRA, without that donation being counted as taxable income when it is withdrawn. To qualify, contributions must come from a traditional IRA or Roth IRA, and they must be made directly to a public charity. Additionally, the donor may not receive goods or services in exchange for the donation, and they must retain a receipt from each charity to which a donation is made.

Giving incentives such as the IRA Charitable Rollover have a tremendous impact on the social sector. According to Independent Sector, the provision led to more than $140 million in gifts during its first two years.  Because it is available to taxpayers whether or not they itemize their tax returns, the rollover helps older Americans, who are more likely not to file itemized returns. Extending this charitable provision permanently provides needed clarity in the tax code and allows for Americans to make giving decisions without wondering whether the provision will continue to exist.

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