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The Pension Protection Act of 2006 added IRC Section 408(d)(8), providing that owners of an IRA who were 70 ½ or older may donate an otherwise taxable distribution from an IRA to an eligible charitable organization. Each year, the IRA owner could exclude from gross income up to $100,000 of these qualified charitable donations. This provision was set to expire at the end of 2011. However, the American Taxpayer Relief Act of 2012 (Pub L No 112-240, § 208) extended the opportunity to make qualified charitable donations to 2012 and 2013.
IRA distributions that are donated to charitable organizations are not taxable, and no deduction is available for the transfer. The donations are counted in determining if the IRA owner has met required minimum distributions for the year.
In IR-2013-6 the IRS announced that for tax-year 2012, IRA owners who received distributions in December 2012 can make a qualified charitable donation in cash of all or part of this distribution until January 31, 2013. IRA owners who make qualified charitable distributions in January 2013 can also choose to report these charitable distributions as made in 2013 or 2012.
Practitioners would be well advised to review their list of clients who are currently receiving IRA distributions to determine if there is an opportunity to reduce tax liability by including charitable donations of IRA distributions as part of their financial and estate planning.
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