Dear Carrie: Can you make a gift to charity from your IRA in 2009 and 2010 and not have to pay taxes? And is your church considered a charity? -- A Reader
Dear Reader: This is a timely question. What you're referring to is called an IRA charitable rollover, which is a distribution made by someone age 70 1/2 or older directly from an IRA to a qualified charity. While you pay income taxes on regular distributions from an IRA, these charitable IRA distributions aren't considered part of your adjusted gross income, so you don't pay taxes on them.
However, the current provision that created this opportunity expired on Jan. 1, 2010. So, the answer is yes and no. In 2009, you could have made a gift to charity from your IRA of up to $100,000 and not pay income taxes on the distribution. Unfortunately, while there is the definite possibility that the provision will be extended by upcoming legislation, currently it's not possible to make this type of IRA charitable rollover in 2010.
WHAT YOU NEED TO KNOW BEFORE YOU FILE
I'm assuming you're asking this question because you're considering taking advantage of this on your 2009 tax return. If you are, here are some important things to be aware of when determining if you're actually eligible to do so:
-- Charitable rollovers had to be completed by Dec. 31, 2009.
-- Donors must have been age 70 1/2 at the time of the transfer to the charitable organization.
-- The distribution had to be made directly from the IRA trustee (your bank or brokerage firm) to the charity.
And here's another important requirement to make sure you can take advantage of the tax-free aspect of the gift: You must have written acknowledgement of your contribution from the charity.
WHICH CHARITIES QUALIFY
Most contributions to public charities qualify. And that includes your church. The caveat is that the charity must be recognized by the IRS as a 501(c)(3) organization. Essentially, this means that the charity must not be organized for the benefit of any private interest or individual and is limited in the political activities it conducts.
However, a contribution made to a donor-advised fund (a private fund administered and managed by a third party) doesn't qualify under the rules of an IRA charitable rollover.
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