The IRA Charitable Rollover provides you with an excellent opportunity to make a gift during your lifetime from an asset that would be subject to multiple levels of taxation if it remained in your taxable estate.
Suppose John wants to make a contribution to Bucknell University. 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 Bucknell University and $5,000 to himself. The $20,000 distributed to Bucknell University will not be subject to federal tax and will be counted toward his annual minimum required distribution.
As you plan your minimum required distributions for this year, if you do not need the money the government is requiring you to take, consider using it for a charitable gift using the IRA Charitable Rollover.
H.R. 2029, the Protecting Americans from Tax Hikes Act of 2015 has permanently extended the IRA Charitable Rollover. Originally passed in 2006 as part of the Pension Protection Act, the IRA Charitable Rollover 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.
Who qualifies? Individuals who are age 70½ or older at the time of the contribution (you have to wait until your actual 70½th birthday to make the transfer).
How much can I transfer? $100,000 per year. The provision no longer has an expiration date.
From what accounts can I make transfers? Transfers must come from your IRAs directly to Bucknell University. 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 Bucknell University.
To what charities can I make gifts? Tax exempt organizations that are classified as 501(c) (3) charities, including Bucknell University, to which deductible contributions can be made.
Can I use the IRA Charitable Rollover 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.
Can I use the IRA Charitable Rollover to support [insert one of your key priorities here]? Yes, all IRA Rollover gifts can be used to support this important need.
How will Bucknell University count the gift? We will give you full credit for the entire gift amount.
What are the tax implications to me?
Does this transfer qualify as my minimum required distribution? Once you reach age 70½, you are required to take minimum distributions from your retirement plans each year, according to a federal formula. IRA Charitable Rollovers count towards your minimum required distribution from the IRA for the year.
Can my spouse also make an IRA Charitable Rollover, even if we are married and file jointly? Yes, every individual can use the IRA Charitable Rollover for up to $100,000 each year.
How do I know if an IRA Charitable Rollover is right for me? You are at least age 70½, and:
What is the procedure to execute an IRA Charitable Rollover? We offer a sample letter you can send to your plan provider to initiate a rollover. Make sure that you contact us when you direct the rollover 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 provision is right for you. This information is not meant as tax or legal advice.
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