Volume LVIFebruary 2009Number 1

IRA "Rollover" Gifts Are Again Tax-Free

A federal law has been passed renewing the tax-free benefit of using IRA funds for charitable gifts. The original law applied to 2007, and the new law renews the benefit through 2009. What it boils down to is this: donors aged 70½+ with regular or Roth IRAs can again give to public charities from their IRAs without being taxed on the withdrawal.

Such gifts normally would count against Required Minimum Distributions (RMDs). However, another new tax law passed this past December suspends RMDs in 2009. Retirees are allowed to skip their RMDs from their regular "traditional" IRAs for this year. (Note that Roth IRAs never require RMDs.) While this removes the necessity of withdrawing from IRAs in 2009, the attractiveness of tax savings from using IRA funds as charitable gifts is still very much there.

Prior to the law renewing tax-free IRA gifts, if a donor wanted to use IRA funds for a charitable contribution the funds were taxable as a withdrawal. There was a charitable deduction for the contribution, but it may or may not have offset the tax. The new law simply eliminates the IRA gift amount from taxable income, in effect granting a 100% deduction - plus other benefits.

To gain the benefit allowed under the law, it is essential that the rules be followed:
  1. Gifts must be made by direct transfer (a "rollover") from the IRA to the charity (donors do not withdraw the money and then write a check). The donor never touches the money.
  2. There is a $100,000 limit per year. The law is retroactive for 2008 and runs through 2009.
  3. The gift must be outright with no benefits to the donor (such as a Charitable Gift Annuity).
  4. There is no charitable deduction since the funds are not included in reportable income.
Who are especially good candidates for considering an IRA rollover gift?
  1. Non-itemizers, because the amount is excluded from income;
  2. Persons already giving at the 50% of adjusted gross income deduction limit;
  3. Persons whose income level causes the reduction of their itemized deductions or the phase-out of their personal exemptions;
  4. Persons for whom additional income will cause more of their Social Security income to be taxed; and
  5. Others who have other limits on their deductions that would prevent them from deducting all of their charitable contributions.

Note that it is more advantageous to make an IRA rollover contribution from a regular ("traditional") IRA than a Roth IRA. The reason is the donor or their heirs can already take federal income tax-free withdrawals from a Roth IRA assuming the account has been open for at least five years.

These are the basics of the law renewing tax-free IRA gifts, and there may be other benefits to individual donors. Masonic Charities always advises anyone considering a planned gift to consult with their own professional advisor. The Office of Gift Planning has simple instructions for making an IRA rollover gift. For further information on this rare opportunity to avoid taxes on IRA funds, please call the Office of Gift Planning at (800) 599-6454.

For further information,
contact the Office of Gift Planning nearest you:

Central Pennsylvania
(717) 367-1121, ext. 33437 or (800) 599-6454

Eastern Pennsylvania
(610) 825-6100, ext. 1348

Western Pennsylvania
(412) 741-1400, ext. 3011 or (866) 872-0664

(717) 367-1121, ext. 33312 or (800) 599-6454

Financial information about Masonic Charities can be obtained by contacting us at 1-800-599-6454. In addition, Masonic Charities is required to file financial information with several states. Colorado: Colorado residents may obtain copies of registration and financial documents from the office of the Secretary of State, (303) 894-2680, http://www.sos.state.co.us/. Florida: SC No. 00774, A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE, WITHIN THE STATE, 1-800-HELP-FLA. Georgia: full and fair description of the programs and activities of Masonic Charities and its financial statement are available upon request at the address indicated above. Illinois: Contracts and reports regarding Masonic Charities are on file with the Illinois Attorney General. Maryland: For the cost of postage and copying, documents and information filed under the Maryland charitable organizations laws can be obtained from the Secretary of State, Charitable Division, State House, Annapolis, MD 21401, (800) 825-4510. Michigan: MICS No. 11796 Mississippi: The official registration and financial information of Masonic Charities may be obtained from the Mississippi Secretary of State's office by calling 1-888-236-6167. New Jersey: INFORMATION FILED WITH THE ATTORNEY GENERAL CONCERNING THIS CHARITABLE SOLICITATION AND THE PERCENTAGE OF CONTRIBUTIONS RECEIVED BY THE CHARITY DURING THE LAST REPORTING PERIOD THAT WERE DEDICATED TO THE CHARITABLE PURPOSE MAY BE OBTAINED FROM THE ATTORNEY GENERAL BY CALLING (973) 504-6215 AND IS AVAILABLE ON THE INTERNET AT www.njconsumeraffairs.gov/ocp.htm#charity. REGISTRATION WITH THE ATTORNEY GENERAL DOES NOT IMPLY ENDORSEMENT. New York: A copy of the latest annual report can be obtained from the organization or from the Office of the Attorney General by writing the Charities Bureau, 120 Broadway, New York, NY 10271. North Carolina: Financial information about this organization and a copy of its license are available from the State Solicitation Licensing Branch at 1-888-830-4989. Pennsylvania: The official registration and financial information of Masonic Charities may be obtained from the Pennsylvania Department of State by calling toll-free, within Pennsylvania, 1-800-732-0999. Virginia: Financial statements are available from the State Office of Consumer Affairs, P.O. Box 1163, Richmond, VA 23218. Washington: The notice of solicitation required by the Charitable Solicitation Act is on file with the Washington Secretary of State, and information relating to financial affairs of Masonic Charities is available from the Secretary of State, and the toll-free number for Washington residents: 1-800-332-4483. West Virginia: West Virginia residents may obtain a summary of the registration and financial documents from the Secretary of State, State Capitol, Charleston, WV 25305. REGISTRATION IN THE ABOVE STATES DOES NOT IMPLY ENDORSEMENT, APPROVAL OR RECOMMENDATION OF MASONIC CHARITIES BY THE STATE.

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