Advanced Underwriting Consultants

Question of the Day – June 28

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client is 71 and has a substantial account balance in a 403(b) account, which he’d like to keep because it is crediting a high interest rate.  Can he make direct charitable gifts from that account?

Answer: No, the direct charitable gift option is only available from IRAs.  The only option for a 403(b) account is to take a distribution, pay taxes on it, and then make a gift to charity.  The taxpayer may be eligible for an offsetting income tax deduction if the taxpayer itemizes and otherwise qualifies for a charitable tax deduction.

The Charitable IRA Rollover first became available under the Pension Protection Act of 2006.  That Act made it possible for IRA owners over the age of 70-1/2 to transfer up to $100,000 per year from their IRAs directly to a public charity without having to report it as taxable income.  In addition to not being included in taxable income, the amount transferred did count towards the Required Minimum Distribution (RMD) for the account owner.

The Charitable IRA Rollover opportunity has been extended multiple times, but it is currently scheduled to expire at the end of this year.

Here are the requirements for doing a Charitable IRA Rollover:

  • The IRA owner must be age 70-1/2 or older on the date of the gift
  • The gift is limited to $100,000 per taxpayer per year
  • The gift must be made directly from the IRA custodian to the charitable organization
  • The gift must be made to a public charity and may not be made to a donor advised fund or supporting organization
  • The gift must be a current outright gift and the donor may receive no benefits in exchange for the gift (i.e. no gift annuity)
  • The gift must be made from IRA funds that would have constituted taxable distributions

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.