IRA Charitable Rollover Now Permanent – This Can Benefit You and the National Osteoporosis Foundation

If you want more bang for your buck, there’s a way to reduce your taxable income while increasing your contribution to the National Osteoporosis Foundation (NOF).

You may have seen this in the news – at the end of 2015 federal legislation was passed and signed that included a permanent extension of the IRA charitable rollover. This law allows traditional and Roth IRA owners, age 70 ½ and older, to make tax-free transfers directly from their IRAs to qualified charitable organizations like NOF.

Here’s how it works…at age 70 ½ the law mandates that you start receiving an annual distribution from your IRA or Roth IRA. You’ll have to pay income taxes on the amount you receive, and for some people, the amount could affect their tax bracket.

If you decide you don’t need additional income, the law allows you to direct your distribution or a portion of your distribution to NOF. In this arrangement, there’s no charitable income tax deduction for you, but the amount of the distribution will be excluded from your 2016 taxable income, creating a “wash” for tax purposes and providing substantial support to the charity.

Here’s an example in very simple terms to illustrate the benefits of this option:

John turned 70 last June.  The law requires that he begin receiving an annual distribution from his IRA in 2016.  John’s financial advisor says he will receive $1,000 this year from the IRA.  Because he is in the 25% federal income tax bracket, John will pay approximately $250 of the $1,000 in income taxes, netting only $750 after taxes. 

John and his advisor determine he doesn’t need the distribution as extra income and instead they explore how the distribution can help support John’s favorite charity, the National Osteoporosis Foundation. By directing the $1,000 distribution to NOF, John will be excluding it from his taxable income and will have the satisfaction of knowing that NOF will be able to apply the full $1,000 with no taxes deducted to its programs and operations. 

If you’d like to use your IRA or Roth IRA distribution to support NOF in the future, please contact the NOF Development office at 703-647-3030. If you are 70 ½ or older this year, please call and use this sample letter with your IRA representative. Thank you!

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