1. The IRA owner must be age 70 ½ or older.
2. The donor must directly transfer the money tax-free to an eligible organization.
3. The maximum amount that an IRA owner may transfer annually tax-free is $100,000 to an eligible organization.
4. This option, created in 2006 and recently extended through 2009, is available to eligible IRA owners, regardless of whether they itemize their deductions.
5. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension plans - commonly referred to as SEP Plans - are not eligible.
6. To qualify, the funds must be contributed directly by the IRA trustee to the eligible charity.
7. Amounts transferred are not taxable and no deduction is available for the amount given to the charity unless nondeductible contributions are transferred.
8. Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.
9. Transferred amounts are counted in determining whether the owner has met the IRA's required minimum distribution rules. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats transferred amounts as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. If nondeductible contributions are transferred to an eligible organization, a charitable contribution deduction may be allowed if itemizing deductions.
10. More information about qualified charitable distributions can be found in Publication 590, Individual Retirement Arrangements.
Posted by Min Young Choi, Associate Editor, Wealth Strategies Journal.
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