Smart Business Magazine, February 2016

44 Smart Business Columbus February 2016 Its permanent Useful IRA charitable rollover made permanent helps donors plan The news that the IRA charitable rollover has been made permanent comes as a relief for the charitably inclined Enacted in 2006 Congress has had to extend it annually And every year they wait until the last minute to renew it so it has always been somewhat of a gamble whether or not to plan to take advantage of it Now donors know its always there The IRA charitable rollover is designed for someone who is motivated to make a gift to a charity says John Schuman Chief Planning Officer at Budros Ruhlin Roe Inc You dont do this to make money but if youre committed to making donations then you can take the money out of your IRA and donate it directly to charity under this provision The donor gets to give the full gift without incurring any negative tax consequences Smart Business spoke with Schuman about the IRA charitable rollover and how it can be used to a donors benefit How might knowing the IRA charitable rollover is permanent affect a persons giving strategy Of the various assets that could be used for charitable purposes the best asset to use as a means of donating to charity is an IRA While it is exposed to the highest tax bracket and its mandatory deductions are taxed as ordinary income all of that can be avoided when its used to make donations directly to a qualifying charity When an individual decides to take a distribution from his or her IRA and donate it to charity the money withdrawn will be taxed at 396 percent Without the charitable rollover donating from an IRA meant it would first be counted as income and subject to tax before the remainder could be gifted For instance lets say a person takes 100000 out of his or her IRA which would be counted as income There is the opportunity to take a 100000 federal tax deduction for giving it to charity but adding that amount to a persons taxable income could mean other itemized federal deductions such as those designed to offset health care costs get phased out so he or she wouldnt get a dollar for dollar deduction Ohio based income doesnt allow itemized deductions so that 100000 donation from an IRA to charity also meant that the donor would move into a higher tax bracket in the state as well Those at or above age 70 1 2 are required to take minimum distributions from their IRAs Fortunately for them a donation counts as a minimum distribution And by giving it to charity its not taxed Using this method of charitable donation also means that the donor will stay below the phase out thresholds and likely not move into a higher tax bracket since the distribution never gets counted as ordinary income What charities qualify to receive donations through this method Which dont Any charity is eligible to receive donations from an IRA including community foundations One restriction however is that money cant be given to a donor advised fund as it allows the donor to continue to control that gift Theres a lot of flexibility regarding the way distributions can be disbursed Its interesting to note that a donor doesnt have to give all of the distribution to one charity but can split it among as many as he or she likes Giving through an IRA has become a useful mechanism for charitably inclined individuals For charities its a preferred method of receiving donations and an easy way to solicit gifts from donors Its a great tool to make it easy for people to give larger gifts to charity And thanks to recent legislation its a method thats with us forever which makes planning much easier than it had been JOHN SCHUMAN Chief Planning Officer Budros Ruhlin Roe Inc 614 481 6900 john schuman@ b r r com Insights Wealth Management is brought to you by Budros Ruhlin Roe Inc INTERVIEWED BY ADAM BURROUGHS INSIGHTS WEALTH MANAGEMENT SOCIAL MEDIA Find Budros Ruhlin Roe online at B R R com on Twitter @ BudrosRuhlinRoe and on Facebook at facebook com BudrosRuhlinandRoe