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BRENDA MCCOLLUM
Florida Baptist Convention
JACKSONVILLE (FBC)—The Emergency Economic Stabilization Act of 2008 reinstated the Charitable IRA Rollover allowing IRA owners who are 70-and-a-half years old to make a direct rollover to a ministry with no tax consequences. The rollover is not taxable as income and no charitable deduction is allowed. The extension lasts until Dec. 31, 2009. The maximum amount that can be rolled to a ministry is $100,000 per year.
For persons who have some other deferred plan such as a 401(k) or 403(b), an IRA account may be set up and assets from their 401(k) or 403(b) rolled into the IRA. Then the IRA may be given to the ministry of choice.
The rollover to a ministry also qualifies as the required minimum distribution for the year. The following types of donors will benefit most from the IRA Rollover gift:
• the convenience donor. The IRA Rollover gift is easy because it is a direct transfer from the IRA custodian to the ministry of choice.
• the generous donor. Some donors give the maximum amount each year that can be deducted from their adjusted gross income (50 percent). Some even carry forward their deductions. Since an IRA Rollover gift does not affect taxable income or deductions, it can be given in addition to the 50 percent of AGI maximum.
• the person on Social Security. Depending on income level, taxes may be paid on social security income. Since the IRA Rollover gift does not increase the taxable income, donors can stay at the lower income level and still make a sizeable gift from their IRAs.
• non-itemizer. For those who take the standard deduction rather than itemizing, the IRA Rollover gift can reduce income since it counts as the required minimum distribution. Income is lower since the taxable distribution from the IRA is decreased, therefore making the standard deduction more beneficial.
nmajor donor. For those who have substantial IRAs as well as stocks, land and other assets, giving the $100,000 maximum to a ministry will reduce income since the distribution counts as the required minimum distribution. By reducing income, the tax liability may be substantially reduced.
While there are no tax consequences to the donor for making a gift by IRA Rollover, the gift must be reported on Form 1040. In addition, the IRA custodian must report the distribution to treasury and the taxpayer on Form 1099-R. The distribution is a qualified charitable distribution (QCD) and the IRS has made provisions for the reporting on Form 1040.
The IRS has approved making a charitable rollover gift from an inherited IRA as well, as long as the new owner is over 70-and-a-half years old. Please note this gift may only be made from an IRA and the check must be made to the charitable beneficiary, not the IRA account owner.
Any questions regarding making a gift from an IRA, please contact the Office of Strategic Endowed Giving at 800-226-8584, ext. 3030.
Brenda McCollum is the director of the Office of Strategic Endowed Giving of the Florida Baptist Convention.