Law allows donations up to $100,000 from IRAs

October 7, 2008

The $700 billion Emergency Economic Stabilization Act enacted by Congress in October 2008 allows individuals age 70-1/2 or older to make a charitable donation up to $100,000 directly from their Individual Retirement Accounts (IRAs) without paying federal income tax on the distribution. This applies to the tax years 2008 and 2009.

• Only distributions from an IRA or a Roth IRA qualify. Outright distributions from employer-sponsored retirement plans, such as 401Ks, and 403Bs, do not qualify.
• The gift must be outright.
• The donor must direct the IRA manager to transfer funds directly from the IRA to the University of Louisville.
• The maximum amount eligible per IRA is $100,000 per eligible IRA owner per year.
• The charity must be a tax-exempt organization to which deductible contributions can be made, such as the UofL Foundation Inc. Transfers to donor-advised funds and charitable trusts don’t qualify.
• The distribution is excluded from the donor's income and no income tax is owed. Also, no income tax deduction is available.

A rollover would benefit you if:

• You don’t itemize your deductions. A qualified charitable distributions from IRA will eliminate the need to claim an income tax charitable deduction. If you don’t itemize, you will enjoy the equivalent of a charitable deduction.
• You are unable to deduct your entire contribution because of the 50-percent-of-AGI limitation. If you have taken the maximum income tax deductions due to the 50-percent-of-AGI limitation, you may find you can give more. IRA rollover gifts operate independently of the percentage limitation rules and, therefore, don't affect other gifts subject to the limitations.
• Your IRA withdrawal under the old law increases your taxable income. For those with modest incomes, adding IRA withdrawals to your other income might cause more of your Social Security payments to be taxable. For those with higher incomes, the impact of an IRA withdrawal on normal income causes the loss of some other credits, deductions and exemptions resulting in a net income tax cost of making a gift to charity.
• You reside in a state where charitable contributions are not deductible on your state income tax return. In states that don’t allow itemized deductions, individuals who made taxable withdrawals from their IRAs and then donated them under the old rules didn’t receive an offsetting charitable deduction against state income tax. Because states generally follow federal income inclusion rules, IRA rollover distributions should be excluded for state income tax purposes under the new law. Therefore, if you reside in one of these states you will benefit if your state continues to follow the federal rules.

For more information about the tax benefits of giving, please contact Suzanne Guss, assistant vice president for planned giving at the University of Louisville, 502-852-6954 or 1-866-872-5489.