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Public Policy
IRA Charitable Rollover
Resource Center
IRA Charitable Rollover Restored
Older Americans are once again able to contribute directly to public charities from their individual retirement accounts, thanks to a provision in the Emergency Economic Stabilization Act of 2008 (H.R.1424), signed into law on October 3, 2008 . The IRA Charitable Rollover tax incentive, which is available through 2009, allows individuals aged 70½ and older to donate up to $100,000 from their Individual Retirement Accounts (IRAs) and Roth IRAs to public charities without having to count the distributions as taxable income.
Why We Support It
Since enactment in August 2006, the IRA Charitable Rollover gave older Individuals the opportunity to give back to their communities by eliminating the barrier in the tax law that had discouraged transfers from individual retirement accounts to charities. The giving incentive is particularly beneficial to those individuals who do not itemize their tax deductions and would not otherwise have received any tax benefit for their charitable contributions. The IRA Charitable Rollover allows older Americans to make millions of dollars of new contributions to the nonprofits —including hospitals, museums, educational institutions, and religious organizations —that benefit people every day.
Current Law
The reenacted IRA Charitable Rollover provision permits individuals age 70½ and above to make charitable donations of up to $100,000 from IRAs and Roth IRAs without having to count the distributions as taxable income. The IRA Charitable Rollover is intended to benefit donors of all incomes, as well as big and small nonprofits alike. Now is your opportunity -- as a charitable organization or as a donor -- to take advantage of this valuable incentive.
- How does the IRA Rollover Work? Taxpayers age 70½ and older are required to make annual distributions from their IRAs. The distributions are included in the taxpayers’ adjusted gross income (AGI), and taxpayers pay taxes on them. The IRA Charitable Rollover permits taxpayers to make donations directly to charitable organizations from their IRAs without counting them as part of their AGI and, consequently, without paying taxes on them.
- Give Now. Only contributions made between January 1, 2008 and December 31, 2009, are eligible for the enhanced tax benefit.
- Age Requirement. Donors must be 70½ years old or older when the distribution is made.
- Donation Limit. A donor’s total combined charitable IRA rollover contributions cannot exceed $100,000 in any one year.
- Eligible Charities. Charitable contributions from an IRA must go directly to a public charity. Contributions to supporting organizations, donor-advised funds, and private foundations, except in narrow circumstances, do not qualify for the tax-free treatment.
The tools below show charities more about determining eligibility to receive tax-free IRA distributions, including the possibility of changing tax-exempt classification.
- Eligible Retirement Accounts. Distributions can only be made from traditional Individual Retirement Accounts or Roth IRAs. Charitable donations from 403(b) plans, 401(k) plans, pension plans, and other retirement plans are ineligible for the tax-free treatment.
- Directly to the Charity. Distributions must be made directly from the IRA trustee payable to the public charity.
- No Gifts in Return. Donors cannot receive any goods or services in return for charitable IRA rollover contributions in order to qualify for tax-free treatment.
- Written Receipt. In order to benefit from the tax-free treatment, donors must obtain written substantiation of each IRA rollover contribution from each recipient charity.
The tools below show donors what they can do to obtain necessary documentation of a gift.
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Tools to Help Charities and Donors Take Advantage of the IRA Charitable Rollover
- Fact Sheet for Charities (PDF): Charities, see this fact sheet to learn about the requirements of the IRA Charitable Rollover and to help your donors take advantage of this incentive.
- Fact Sheet for Donors (PDF): Donors, use this fact sheet to learn how to take advantage of the IRA Charitable Rollover. Charities, distribute the fact sheet to your donors.
- Sample Letters
Donors: In order to receive a tax benefit, you must obtain a receipt containing certain information from each charity to which you make an IRA distribution. Use these sample letters, created by the Planned Giving Design Center, to make sure your IRA administrator provides all necessary information to the recipient charity and to alert the charity to your forthcoming gift.
Charities: Use PGDC's sample letter to provide written acknowledgement to your donors. (Scroll down to the end of Mark Hoffman's article to see the sample documents.)
- Questions and Answers, from Treasury/IRS: Donors and charities, see guidance (PDF) on frequently asked questions about making charitable distributions from IRAs, from the Treasury Department and Internal Revenue Service (Notice 2007-7, pages 13-16).
- Changing Your Exempt Organization Classification: Supporting organizations, see the Internal Revenue Service's guidance (PDF) (Announcement 2006-93) explaining how a 501(c)(3) tax-exempt organization can seek to change its public charity classification. This guidance is intended for organizations that are currently characterized as supporting organizations -- and, as such, are ineligible to receive tax-free distributions from IRAs -- and believe they are eligible to change their classification.
- Reporting IRA Rollover Distributions on the Form 990-R: Donors, see the Internal Revenue Service’s corrected instructions explaining how to report charitable IRA distributions on the 2006 Form 1099-R.
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Tracking Experiences with and the Impact of the IRA Rollover on Charitable Giving
As donors, charities, and IRA administrators use the IRA Charitable Rollover for the first time, they are naturally encountering unanticipated questions and challenges. Independent Sector and others in the nonprofit community are working with the U.S. Department of Treasury and Internal Revenue Service to resolve unintended consequences. Share your experiences with Independent Sector by emailing us at publicpolicy@independentsector.org.
Also, complete the National Committee on Planned Giving's Survey of IRA Rollover Gifts to Charity. NCPG, co-chair with IS of the IRA Rollover Coalition, is tracking information on IRA Rollover gifts to charity so that it is able to report the impact of the gifts to legislators and identify questions and problems that may impede the widest possible implementation of the incentive.
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Additional Resources
Also see public policy background on the IRA Charitable Rollover.
Last updated: October 6, 2008
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