IRA charitable rollover provides opportunity for support to USA Wrestling
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by Larry Nugent
Dear Wrestling Supporter,
On December 31, 2007, the IRA charitable rollover provision of the Pension Protection Act of 2006 (PPA or H.R. 4) will expire. This significant philanthropic opportunity enables anyone who is 701/2 years or older to distribute up to $100,000 of IRA proceeds as a charitable gift directly to any qualifying public charity without triggering adverse tax consequences.
To date, charitable seniors have donated over $102 Million in gifts as reported by charities nationwide. There have been positive responses from many donors about how easy it is to accomplish the IRA charitable rollover.
The benefits, limitations, and opportunities of H.R. 4, as well as the types of clients who may be particularly well suited to take advantage of the IRA charitable rollover, are discussed in detail below.
1) The PPA excludes up to $100,000 from Income for IRA Distributions to Charity.
Though December 31, 2007, a supporter who is 701/2 years or older at the time of the gift may distribute up to $100,000 of IRA assets tax-free. Distributions must be made directly by the IRA trustee from a traditional IRA or Roth IRA to a qualified public charity. The IRA gift will be counted toward the annual minimum distribution requirements, and the amount will be excluded from gross income, provided the distribution would otherwise be taxable. Tax-free IRA rollover can also complement other tax and estate planning strategies by reducing income and estate taxes.
2) Limitations on Eligible Retirement Accounts and Eligible Charities.
Distributions from 403 (b) plans, 401(k) plans, pension plans, and other retirement plans are not eligible for this favorable tax treatment. However, it may be possible to establish a new IRA and rollover assets from other qualified retirement plans into the new IRA, and then make a charitable distribution from the new IRA.
Contributions to donor-advised funds, supporting organizations, private non-operating foundations, life income plans, and charitable lead trusts do not qualify for favorable IRA distribution treatment under the PPA. As always, you may make deductible charitable gifts to any of these programs by withdrawing funds from an IRA, rather than via direct distribution. However, the amount of the withdrawal would be included in your gross income, and the charitable deduction would be limited to not more than 50% of your adjusted gross income. You may establish a fund with IRA rollover assets with a bequest, donor-advised fund remainder, or charitable gift annuity remainder.
3) Philanthropic Opportunities at USA Wrestling.
If you have an IRA and do not depend on all or some part of it for your income, the IRA charitable rollover may present a particularly efficient opportunity for a gift to USA Wrestling programs:
a)National Teams Training is the primary resource our athletes require to compete against the best international wrestlers in Olympic and World Competition. Supporters will know Team USA's success was in part due to their contribution.
b)A Restricted Donation, which may be established in a field of interest, to meet a need in wrestling, or to contribute to a particular USA Wrestling program. USA Wrestling can provide a list of programs all designed to further our mission as the national governing body for our great sport.
c) An Unrestricted Donation that allows USA Wrestling the discretion to use the donation in a way that it believes will best strengthen wrestling.
d) The Legends Fund Annual Campaign which is a fundraising partnership of two major organizations who spearhead our leadership in the wrestling world-the National Wrestling Hall of Fame & Museum and USA Wrestling, our sports governing body.
4) Who May Benefit from the IRA Charitable Rollover.
a) Convenience donors: These are those who find the IRA charitable rollover to be a simple and easy method for making for making an end of year gift. Since IRA owners often delay taking their withdrawals until the last quarter of the year, these donors find that the IRA rollover helps them to facilitate the decision about a gift. Further, donors need only contact their IRA custodians to arrange for the gift.
b) Donors who wish to exceed the 50% AGI limit: some very generous donors are already giving at 50% of their adjusted gross income level. The IRA charitable rollover provision effectively enables donors to make gifts that are equal to or even exceed their annual income, and do not affect other gifts subject to the percentage limitation rules. Some generous donors may in effect give 100% or more of their income through this method and find they have an opportunity to make a greater impact.
c) High Net Worth Individuals: For many professionals and business owners, an IRA may serve as a major asset in the estate. Reducing the size of the IRA through charitable distributions can be beneficial in balancing the estate assets and lessening future estate tax burdens. In addition, there may be income tax benefits, as there are several types of exemptions that are phased out at higher income levels.
d) Social Security Recipients: These donors may save substantial taxes on their Social Security income by making an IRA transfer directly to charity rather than withdrawing IRA funds. Social Security is subject two levels of taxation based on income. For those whose income exceeds the first level, 50% of Social Security is taxed. For those whose income exceeds the second level, up to 85% of Social Security may be taxed. Withdrawing IRA funds may cause the donor's income to increase to 85% Social Security tax bracket, even if the amount withdrawn is subsequently donated to charity.
e) Standard Deduction Donors (non-itemizers): These are donors who have few deduction - they have no mortgage and their medical deductions are less than 7.5% of AGI - so they do not have a sufficient level of deductions to itemize and instead use the standard deduction. For these donors, it is always preferable to make IRA gifts directly to charity and avoid the additional income tax.
We hope that you find this information helpful during your year-end tax and philanthropic planning. Please consider if you may benefit from the IRA charitable rollover before it expires. If you have questions or would like more information or assistance with the IRA rollover, please contact your tax advisor.
On December 31, 2007, the IRA charitable rollover provision of the Pension Protection Act of 2006 (PPA or H.R. 4) will expire. This significant philanthropic opportunity enables anyone who is 701/2 years or older to distribute up to $100,000 of IRA proceeds as a charitable gift directly to any qualifying public charity without triggering adverse tax consequences.
To date, charitable seniors have donated over $102 Million in gifts as reported by charities nationwide. There have been positive responses from many donors about how easy it is to accomplish the IRA charitable rollover.
The benefits, limitations, and opportunities of H.R. 4, as well as the types of clients who may be particularly well suited to take advantage of the IRA charitable rollover, are discussed in detail below.
1) The PPA excludes up to $100,000 from Income for IRA Distributions to Charity.
Though December 31, 2007, a supporter who is 701/2 years or older at the time of the gift may distribute up to $100,000 of IRA assets tax-free. Distributions must be made directly by the IRA trustee from a traditional IRA or Roth IRA to a qualified public charity. The IRA gift will be counted toward the annual minimum distribution requirements, and the amount will be excluded from gross income, provided the distribution would otherwise be taxable. Tax-free IRA rollover can also complement other tax and estate planning strategies by reducing income and estate taxes.
2) Limitations on Eligible Retirement Accounts and Eligible Charities.
Distributions from 403 (b) plans, 401(k) plans, pension plans, and other retirement plans are not eligible for this favorable tax treatment. However, it may be possible to establish a new IRA and rollover assets from other qualified retirement plans into the new IRA, and then make a charitable distribution from the new IRA.
Contributions to donor-advised funds, supporting organizations, private non-operating foundations, life income plans, and charitable lead trusts do not qualify for favorable IRA distribution treatment under the PPA. As always, you may make deductible charitable gifts to any of these programs by withdrawing funds from an IRA, rather than via direct distribution. However, the amount of the withdrawal would be included in your gross income, and the charitable deduction would be limited to not more than 50% of your adjusted gross income. You may establish a fund with IRA rollover assets with a bequest, donor-advised fund remainder, or charitable gift annuity remainder.
3) Philanthropic Opportunities at USA Wrestling.
If you have an IRA and do not depend on all or some part of it for your income, the IRA charitable rollover may present a particularly efficient opportunity for a gift to USA Wrestling programs:
a)National Teams Training is the primary resource our athletes require to compete against the best international wrestlers in Olympic and World Competition. Supporters will know Team USA's success was in part due to their contribution.
b)A Restricted Donation, which may be established in a field of interest, to meet a need in wrestling, or to contribute to a particular USA Wrestling program. USA Wrestling can provide a list of programs all designed to further our mission as the national governing body for our great sport.
c) An Unrestricted Donation that allows USA Wrestling the discretion to use the donation in a way that it believes will best strengthen wrestling.
d) The Legends Fund Annual Campaign which is a fundraising partnership of two major organizations who spearhead our leadership in the wrestling world-the National Wrestling Hall of Fame & Museum and USA Wrestling, our sports governing body.
4) Who May Benefit from the IRA Charitable Rollover.
a) Convenience donors: These are those who find the IRA charitable rollover to be a simple and easy method for making for making an end of year gift. Since IRA owners often delay taking their withdrawals until the last quarter of the year, these donors find that the IRA rollover helps them to facilitate the decision about a gift. Further, donors need only contact their IRA custodians to arrange for the gift.
b) Donors who wish to exceed the 50% AGI limit: some very generous donors are already giving at 50% of their adjusted gross income level. The IRA charitable rollover provision effectively enables donors to make gifts that are equal to or even exceed their annual income, and do not affect other gifts subject to the percentage limitation rules. Some generous donors may in effect give 100% or more of their income through this method and find they have an opportunity to make a greater impact.
c) High Net Worth Individuals: For many professionals and business owners, an IRA may serve as a major asset in the estate. Reducing the size of the IRA through charitable distributions can be beneficial in balancing the estate assets and lessening future estate tax burdens. In addition, there may be income tax benefits, as there are several types of exemptions that are phased out at higher income levels.
d) Social Security Recipients: These donors may save substantial taxes on their Social Security income by making an IRA transfer directly to charity rather than withdrawing IRA funds. Social Security is subject two levels of taxation based on income. For those whose income exceeds the first level, 50% of Social Security is taxed. For those whose income exceeds the second level, up to 85% of Social Security may be taxed. Withdrawing IRA funds may cause the donor's income to increase to 85% Social Security tax bracket, even if the amount withdrawn is subsequently donated to charity.
e) Standard Deduction Donors (non-itemizers): These are donors who have few deduction - they have no mortgage and their medical deductions are less than 7.5% of AGI - so they do not have a sufficient level of deductions to itemize and instead use the standard deduction. For these donors, it is always preferable to make IRA gifts directly to charity and avoid the additional income tax.
We hope that you find this information helpful during your year-end tax and philanthropic planning. Please consider if you may benefit from the IRA charitable rollover before it expires. If you have questions or would like more information or assistance with the IRA rollover, please contact your tax advisor.
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