More interesting opportunities from Fiscal Cliff version of IRA law

One of the stranger parts of the standard IRA giving rules, to me at least, is that donors can not use the Charitable IRA Giving Provision until they reach age 70.5 (according to the IRS – the day after your half-birthday).  This was meant literally – don’t request that IRA gift until you reach that actual date (even though you are obviously turning 70.5 in the particular year).

For donors interested in taking advantage of IRA giving, and who are turning 70.5 in January this year, it appears that you can take advantage of the two retroactive features of the IRA reinstatement (either matching a December IRA withdrawal with a check to a charity or instructing your IRA administrator to transfer IRA funds to a charity – if either happen in January after you officially turn 70.5).

In other words, it appears as though donors who were not able to use the IRA giving provision in 2012 (because they were not yet 70.5) might have a chance to use it in January (as long as they turn 70.5 before using it) for 2012 under this special rule.

Of course, anyone turning 70.5 in January 2013 does not have to take their first RMD until April 1, 2014!  Since they are not required to withdraw funds from their IRAs yet, this loophole may not mean much.   Anyway, if such people want to use the IRA giving law to offset their expected RMDs for 2013, they should probably wait until February to make their IRA gifts in lieu of RMDs.

This last point is an interesting one for people turning 70.5 in January.  Technically, you will not have to take your RMD until April 1, 2014 – pushing off the tax bite until 2014’s tax return.  But, you will also have a 2014 RMD, so that year you could have a double RMD tax hit.  Maybe making a gift to charity from your IRA is a nice way to lesson that tax bite? Just a thought.

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