In December 2015, Congress enacted a permanent extension of the IRA Charitable Rollover. Under the now permanent law, if you are 70½ or older, the IRA Charitable Rollover has the ability to provide you with a new opportunity to make charitable gifts.
The IRA Charitable Rollover gift is a means by which certain individuals can support charitable causes. If you are 70½ or older and have an IRA, you can now transfer an amount up to $100,000 without reporting the transfer as taxable income. You pay no taxes on the transfer, and your gift will be used to support the charitable organizations of your choice.
You can also use the rollover gift to count against your required minimum distribution (RMD). Gifts from an IRA rollover may also prevent you from being bumped into a higher federal and/or state income tax bracket, or from falling into the Alternative Minimum Tax (AMT). In addition, an IRA Charitable Rollover gift may be an excellent way to ensure you do not reach the phase-out on your deductions and personal exemptions.
If you wish to make a significant gift without using cash or other assets and you are 70½ or older, consider a gift from your IRA. If you do not need all or a portion of your IRA income, or if you want to give above and beyond your normal giving, consider a gift from your IRA. Whatever your reason, IRA Charitable Rollover gifts can make a huge difference!
If you would like to make a gift from your IRA, please contact your financial adviser or your IRA plan administrator. They can advise you of the process in which you can make a rollover gift to IBH Addiction Recovery Center or the charitable organization of your choice. If you have any questions, please contact the Geri Douglas Marshall, IBH Director of Development, at 330-644-4095, x306.
What is a charitable IRA rollover?
The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income — and count toward their required minimum distribution — certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including IBH Addiction Recovery Center and the IBH Foundation.
How does this help me?
A charitable IRA rollover makes it easier to use IRA assets, during lifetime, to make charitable gifts.
Why will lifetime IRA gifts be easier?
Under current law, withdrawals from traditional IRAs and certain Roth IRAs are taxed as income, even if they are immediately directed to a charity. The donor receives a tax deduction for his or her donation, but various other federal, and sometimes state, tax rules can prevent the deduction from fully offsetting this taxable income. As a result, many donors have chosen not to use IRA assets for lifetime gifts. The charitable IRA rollover eliminates this problem.
What gifts qualify for a charitable IRA rollover?
A gift that qualifies, technically termed a “qualified charitable distribution,” is:
• Made by a donor age 70 1/2 or older
• Transferred from a traditional or Roth IRA directly to a permissible public charity, such as IBH.
• Completed during the applicable tax year
Is there a limit on the amount that can be given?
Yes, there is a limit. An individual taxpayer’s total charitable IRA rollover gifts cannot exceed $100,000 per tax year.
What about the required minimum distribution?
If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.
Is an income tax deduction also available?
No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.
Why are Roth IRAs included? Aren’t withdrawals from a Roth IRA tax-free?
Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a charitable IRA rollover.
Can other retirement plans, such as 401(k) and 403(b) accounts, be used?
No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.
Can a gift be made to any charity?
No. Excluded are:
• Donor advised funds
• Supporting organizations
• Private foundations
Who can benefit from using the charitable IRA rollover to make a gift?
• Persons with significant assets in an IRA
• Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
• Persons having so few deductions that they choose not to itemize
Can a rollover gift be used to fund a charitable remainder trust or charitable gift annuity?
No. The donor can receive no benefits in return for the gift. This includes life income plan payments.
Are there any benefits that a donor can receive?
The only permissible benefits from a charitable IRA rollover gift are those that would not reduce the tax deduction for which the donor would have otherwise qualified.
What if a withdrawal does not meet the requirements of a charitable IRA rollover?
It simply will be included in taxable income as other IRA withdrawals currently are.
Is the charitable IRA rollover right for everyone?
While this is a great option, other types of gifts may provide donors with more tax benefits. As with any gift planning question, donors should consult their tax professionals for specific advice.
Can I still make a gift with an IRA beneficiary designation?
Absolutely! Whether or not you choose to make a charitable IRA rollover gift, you can still designate IBH as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.
If I made a charitable IRA rollover gift in other tax years, can I do this again for the current tax year?
Yes. The current law extends the charitable IRA rollover provision indefinitely — with no expiration date — allowing individuals to make qualifying gifts every tax year.