A tax incentive for charitable giving that allows individuals 70 and six months old and older to make tax-free donations of up to $100,000 to charitable organizations from individual retirement accounts (IRAs) is now permanent law.
President Barack Obama signed the Protecting Americans from Tax Hikes (PATH) Act of 2015 into law shortly after the U.S. Senate passed the legislation on December 18.
The legislation permanently extends a legislative provision first established in 2006 under the Pension Protection Act, allowing individuals to use “rollover” IRA payments as charitable donations without the distribution being treated as taxable income.
The IRA charitable rollover is also retroactive to January 1, 2015.
The permanent renewal of the IRA charitable rollover is a “momentous win for all U.S. nonprofits and their donors,” according to the Long Beach Community Foundation (LBCF), a nonprofit organization with more than $25 million in assets and more than 100 charitable funds.
Without the incentive, individuals who may have paid off their home mortgages and no longer file itemized tax returns could “incur a large tax burden” when donating to charitable organizations from IRAs, according to the LBCF.
The LBCF adds that the IRA rollover provision removes “negative tax consequences and encourages individuals to give back to their communities during their lifetime.” LBCF notes that individuals have until December 31 to make contributions to nonprofits for the 2015 tax year.
For more information, it is suggested that individuals contact a financial advisor.