Seniors: Act Fast If You Want to Transfer IRA Assets Directly to Charity

Philanthropic seniors in the US have only until the end of January to decide whether to make a tax-neutral transfer of up to $100,000 in IRA assets to the charity of their choice. For many, this could significantly lower their tax bill.

A patch in the American Taxpayers Relief Act of 2012 (ATRA) allows taxpayers who are at least 70.5 years old to take advantage of the so-called CARE Act in their 2012 tax filing if they withdrew the assets from their traditional individual retirement account (IRA) in December 2012 and complete the donation by the end of January 2013.

For many donors, the result would be better than the principal alternative—taking a taxable distribution from the IRA and making a tax-deductible donation to a charity—because the taxes due would be larger than the benefit of the tax deduction.

However, some donors would save more on their 2012 taxes by passing up on the CARE Act and contributing zero- or low-basis stock to the charity, instead.

Due to other changes in tax rates in ATRA, contributing zero- or low-basis stock may be a less attractive alternative in 2013 than in 2012. For many donors, this may make the use of the CARE Act the optimal choice for charitable giving in 2013.

As with most tax questions, there are several other factors to take into account before making a final decision, such as state tax rate, adjusted gross income level and the 3% phase-out of itemized deductions this year. Donors should consult tax counsel to determine the appropriate course of action. 

Bernstein does not give tax or legal advice. Taxpayers should consult professionals in those areas before making any decisions.

Brian D. Wodar

Financial Advisor
Brian D. Wodar is a Senior Vice President and Financial Advisor in Bernstein’s West Palm Beach office. He provides customized advice to individuals, families, trusts and foundations in nearly every aspect of their financial lives. Wodar joined the firm in 1997, and led Bernstein’s largest private-client research effort to date—the creation of the Wealth Forecasting System. As Director of the Wealth Planning and Analysis Group, Wodar has advised clients across the firm in the areas of investment strategy, retirement planning, wealth transfer, concentrated stock and option exposure, sales of privately held businesses, philanthropic giving and pre-immigration planning. He has also published extensively on each of these topics. In 2008, he became the National Director of Philanthropy, which has provided him the opportunity to focus his efforts on financial advice for not-for-profit organizations and their donors. Wodar has a BA in English from SUNY Albany, an MA in literature from NYU and an MBA in finance from NYU. He moved from Bernstein’s New York office to Chicago in 2005 and then to West Palm Beach, Florida, in 2013.

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