The IRA Charitable Rollover is Now Permanent
This tax efficient gift allows a donor who is at least 70½ years old to make a direct transfer from his or her IRA to Wheaton. As a reminder, the benefits of a direct charitable distribution from an IRA include the following:
- The distribution is not included in your adjusted gross income, so you can benefit even if you do not itemize deductions on your tax return.
- It may lower your state income taxes if your state of residence taxes retirement distributions and limits charitable deductions.
- It may reduce the amount of your taxable social security income.
- The distribution avoids limitations on the deductibility of large charitable gifts.
- It may lower tax rates and prevent deduction phase-outs for higher-income families.
- It can count toward your minimum required distribution for 2016.
- You can contribute up to $100,000 directly from your IRA, tax free.
IRA Charitable Rollovers provide significant support for the students and ministry of Wheaton College. To take advantage of this opportunity, please contact your IRA custodian and direct them to make a 2016 distribution to Wheaton before the end of the year.
If you have any questions or would like more information, please do not hesitate to contact us. You may call David Teune, Director of Gift Planning Services, or Ruth Langworthy, Associate Director, at 630-752-5332, or email us at firstname.lastname@example.org.
Deductibility of Charitable Gifts
If you itemize your deductions, making charitable gifts can play a significant role in reducing taxable income. However, there are rules which may limit your charitable deduction in a particular year. The American Taxpayer Relief Act of 2012 caps the itemized deductions for individuals earning more than $250,000 and married couples earning more than $300,000.
Cash gifts can be deducted up to 50% of adjusted gross income. Any excess may be carried over for five additional years until completely used.
Gifts of appreciated assets, such as securities and real estate (which have been held for longer than one year), can be deducted at full fair market value up to 30% of adjusted gross income. If the gift is made outright to charity, then the entire capital gain on the asset is avoided. Gifts that return income may have some capital gains ramifications. NOTE: The deduction for gifts of appreciated assets held for one year or less may be limited to your cost basis in the asset.
Gifts of tangible personal property, such as works of art or jewelry, can be deducted in an amount equal to 30% of your adjusted gross income. In order to claim a full fair market value deduction, those assets must be used in a manner that is related to the charity's exempt purpose. If this use of the asset is not related to the charity’s exempt purpose, you may only deduct your cost basis.
The current federal income tax rates range from 10% all the way to 39.6%. State income rates are in addition to these federal rates.
Capital Gains Taxes
Generally, for investment assets held for longer than one year, the federal capital gains tax rates range from 0 to 20% depending on the regular tax bracket of the donor. State capital gains taxes are in addition to any federal taxes. For investment income above $200,000 (or $250,000 for a couple), there is an additional 3.8% "Obamacare" tax.