IRA Charitable Rollover Gifts
Did you know that the IRA Charitable Transfer benefits donors aged 70 ½ and up?
The IRA Charitable Transfer is an excellent way to make gifts and receive tax benefits in return. As you plan your required minimum distributions for this year, consider using your IRA account to make the most of your charitable giving. You receive a tax benefit even if you take the standard deduction! It’s important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to share this gift plan with your financial advisor.
- You must be age 70½ or older at the time of gift.
- Transfers must be made directly from a traditional IRA account by your IRA administrator to the Newberry Library.
- Gifts must be outright. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities do not qualify.
- Gifts from 401k, 403b, SEP and other plans do not qualify. Ask your financial advisor if it would be right for you to create a traditional IRA account so you can benefit from the IRA Charitable Transfer.
- Donate up to $100,000 annually.
- IRA Charitable Transfers are excluded gross income for federal income tax purposes on your IRS Form 1040. You receive no charitable deduction
- Count towards your required minimum distribution for the year in which you made the gift.
John is 71 wants to make a contribution to the Newberry Library. He has $500,000 in his IRA and he wants the contribution to be $20,000. He can authorize the administrator of his IRA to transfer $20,000 to the Newberry Library. Because the IRA Charitable Transfer is excluded from income, John will not be eligible for a charitable income tax deduction but he still receives tax savings. The $20,000 distributed to the Newberry Library will be counted toward his annual minimum required distribution and he will not pay income tax on the portion given to charity.
Questions and Answers
What tangible benefits can I receive from an IRA Rollover gift?
IRS guidelines prohibit you from receiving tangible benefits in exchange for contributions made via IRA Rollover gifts. You must either waive benefits or use a personal funding source to pay for 100% of a gift that contains valued benefits — this means that you may not “buy back” just the goods/services portion of your membership using personal funds.
What’s the IRS Rule?
The IRA Charitable Transfer allows individuals age 70½ and older to make direct transfers totaling up to $100,000 per year to 501(c)(3) charities, without having to count the transfers as income for federal income tax purposes. No charitable deduction may be taken, but distributions will qualify for all or part of the IRA owners required minimum distributions.
Individuals who are age 70½ or older at the time of the contribution (you have to wait until 6 months after your 70th birthday to make the transfer).
How much can I transfer?
$100,000 per year. The transfer must be outright to charity.
From what accounts can I make transfers?
Transfers must come from your IRAs directly to the Newberry Library. If you have retirement assets in a 401k, 403b etc., you must first roll those funds into an IRA, and then you can direct the IRA administrator to transfer the funds from the IRA directly to the Newberry Library.
To what charities can I make gifts?
Tax exempt organizations that are classified as 501(c) (3) charities, including the Newberry Library, to which deductible contributions can be made.
Can I use the IRA Charitable Transfer to fund life-income gifts (charitable gift annuities, charitable remainder trusts, or pooled income funds), donor advised funds or supporting organizations?
No, these are not eligible.
How will the Newberry Library count the gift?
We will give you full credit for the entire gift amount.
What are the tax implications to me?
- Federal — You do not recognize the transfer to the Newberry Library as income, provided it goes directly from the IRA administrator to us; therefore, you are not entitled to an income tax charitable deduction for your gift.
- State — Each state has different laws, so you will need to consult with your own advisors. Some states have a state income tax and will include this transfer as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their state income tax on the federal income or federal tax paid. Still other states have no income tax at all.
Does this transfer qualify as my required minimum distribution?
Once you reach age 70½, you are required to take required minimum distributions from your retirement plans each year, according to a federal formula. IRA Charitable Transfers count towards your minimum required distribution for the year in which you make the gift.
Can my spouse also make an IRA Charitable Transfer?
Yes, every individual who is the owner of a traditional IRA account can use the IRA Charitable Transfer for up to $100,000 each year.
How do I know if an IRA Charitable Transfer is right for me?
- Share this information with your financial advisor. Our office can provide further information and examples of this gift plan. Call us. We would be delighted to help.
What is the procedure to execute an IRA Charitable Transfer?
We offer a sample letter you can send to your plan provider to initiate the transfer. Please let your plan administrator know that this gift must be sent prior to December 31 to qualify as an IRA Charitable Transfer. Make sure that you contact us when you direct the transfer so we can look for the check from your IRA administrator.
For more information, please contact us.
Important: Be sure to check with your financial advisor to determine whether this gift plan is right for you. This information is not meant as tax or legal advice.