Nontaxable IRA Transfers to Eligible Charities

 by Marie Jett, CPA and Anna Stolyarenko | Members of the Tax Services Group

Prior to 2012, taxpayers could take up to $100,000 of the required minimum distribution (RMD) from their IRA and, if donated directly to a charitable organization, exclude the RMD from income. In the 2012 Taxpayer Relief Act law that was just recently passed, taxpayers can once again elect to make tax-free distributions of their RMD to a charity from an IRA of up to $100,000 per year for 2012 and 2013. These distributions are not subject to the charitable contribution percentage limits. Since the law was passed after 2012 RMDs were already made, Congress has enacted special elections for 2012. To be eligible, the distribution must have been paid out during December 2012 and transferred in cash to an eligible charitable organization before Feb. 1, 2013. A taxpayer can pay any amount up to the RMD to the charitable organization. In addition, if a taxpayer was required to make a RMD from the IRA in 2012 and failed to do so, the taxpayer may elect to have a distribution paid directly to a charitable organization in January 2013 be treated as if it were made on December 31, 2012. Going forward in 2013, any RMD payments from IRAs must be paid directly to the charitable organization to be excluded from income.

One important item to note is that this exclusion from income is only for Federal tax purposes. The state of Indiana, at this point in time, will require taxpayers to include the amount of the RMD in taxable income.

Contact Information

Marie Jett, CPA, Manger, the Tax Services Group | mjett@greenwaltcpas.com | 317.260.4475

Anna Stolyarenko, Staff, Tax Services Group | astolyarenko@greenwaltcpas.com | 317.260.4469