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The Charitable IRA Rollover: Convenient, Tax Efficient and now Permanent

In late December, President Obama signed the Tax Increase Prevention Act of 2015, an extensive piece of legislation that included, once and for all, a provision making permanent an individual’s opportunity to make a charitable IRA rollover gift.

No longer does a prospective donor have to wait to see whether Congress will extend this provision for the current year and whether, if extended, that there will be sufficient time to complete the charitable IRA rollover gift process. Permanency of a tax law is an important component of financial, estate and charitable planning because individuals can rely upon it thus providing them a sense of certainty regarding their planning decisions. Now individuals can rely upon the charitable IRA rollover being available every year.

Briefly, the charitable IRA rollover allows certain taxpayers to make charitable contributions to public charities without income tax consequences and have that charitable contribution qualify toward meeting some or all of the donor’s annual required minimum distribution (RMD).

To best explain the finer points of a charitable IRA rollover, the remainder of this bulletin will follow a question and answer format.

1) What is an IRA charitable rollover?

An IRA charitable rollover is considered a “qualified charitable distribution.” A QCD as it is called has the following requirements:

  1. the IRA owner must have attained the age of 70 ½, (it is recommended that the donor wait a day or two beyond the day he/she turns 70 ½ before making the gift).
  2. the charitable gift must be made directly from the IRA administrator or trustee to a public charity (not a donor advised fund or supporting organization),
  3. gifts may be made from only traditional IRAs and certain Roth IRAs (generally those in existence for not more than five years),
  4. the aggregate gift may not exceed $100,000 annually regardless of whether multiple IRAs are used or multiple charities are the gift recipients, (a husband and wife may each gift up to $100,000 annually from their respective IRAs),
  5. the exclusion from income only applies if the distribution would otherwise have been treated as taxable income, and
  6. the full contribution to the charity would have been deductible. As such there can be no goods or services (any quid pro quo) provided to a donor or even made available. Any goods or services even of nominal value may taint the entire gift causing it to be included in income.

2) What are the donor’s income tax consequences of making a charitable IRA rollover gift?

If the QCD requirements are met, the gifted amount is excluded from the donor’s income. To validate that the distribution is excluded from income, the gift must be substantiated by the charity indicating that no goods or services were given in consideration of the gift. Likewise, there is no deduction since the gifted amount is not considered income.

3) Without the charitable IRA rollover, what are the income tax consequences to a donor in its absence?

In the absence of the charitable IRA rollover provision, a donor who decided to use IRA account funds to make a charitable gift to UWPV would have the following income tax consequences:

  1. donor makes a withdrawal from his/her IRA. The amount of the withdrawal must be included as income on the donor’s current year federal income tax return.
  2. donor deposits the withdrawal check into his/her checking account.
  3. donor writes a check to UWPV for the amount of the withdrawal.
  4. donor deducts the amount of the gift to UWPV as an itemized charitable deduction on Schedule A.

This series of steps zeroes out any current income tax liability attributed to this transaction and seems to suggest that a special charitable IRA rollover provision is unnecessary; however, it opens a Pandora’s box of seemingly endless undesired tax and related costs because the withdrawn amount must be recognized as income. This increases the donor’s adjusted gross income (AGI) and here lies the problem.

The adjusted gross income and a closely related term—modified adjusted gross income—are threshold amounts from which certain itemized deductions, personal exemptions, taxability of Social Security benefits, determination of Medicare premiums, eligibility for and phase-out of various tax credits and other vital calculations are made.

Please note that this withdrawal and deduction process described above remains intact and must be used for charitable gifts made from all other types of qualified retirement plans such as 401(k) or 403(b) plans unless those plans are converted to IRAs or Roth IRAs to take advantage of the charitable IRA rollover and must also be used for IRA gifts in excess of the $100,000 annual limit imposed by the charitable IRA rollover even assuming that the rollover procedure is used for the first $100,000. Unfortunately, an uninformed taxpayer/donor may still use the withdrawal and deduction process thinking that his/her income tax result will be the same as if the charitable IRA rollover procedure were used. This would be a potentially costly mistake.

4) I’m contemplating a charitable gift from my IRA. Can you provide specific examples where it would be to my advantage to use the charitable IRA rollover?

Unnecessarily increasing your adjusted gross income may increase your income tax liability through reduced or phased out deductions, personal exemptions and tax credits. A greater amount of your Social Security benefit may be subject to tax and your Medicare premiums for parts B and D may be higher.

  1. If a donor elects the standard deduction: By using the charitable IRA rollover, the donor eliminates the concern of taking an IRA withdrawal into income without the availability of an offsetting deduction as there is no income.
  2. If a donor lives in Massachusetts or Connecticut: The charitable IRA rollover eliminates the concern that neither Massachusetts nor Connecticut allows itemized charitable deductions on its individual income tax returns.
  3. If a donor has significant medical expenses: Those expenses are deductible on Schedule A to the extent they exceed 10% of adjusted gross income (if a taxpayer or spouse was age 65 or older in 2013 they are grandfathered under the 7.5% threshold until 2017). By using the charitable IRA rollover, a donor’s AGI will not be increased thus decreasing the likelihood that his/her medical expense deductions may be reduced or eliminated.
  4. If a donor has miscellaneous itemized deductions: Job hunting costs, union dues or tax preparation fees, and many other miscellaneous deductions are deductible to the extent they exceed 2% of AGI. Again, by using the charitable IRA rollover, the donor’s AGI will not be increased thus decreasing the likelihood that his/her miscellaneous deductions will be reduced or eliminated,
  5. If a donor gives more than 50% of his/her AGI to charity in a given calendar year: By using the charitable IRA rollover, the gift will not be included in determining the 50% of AGI deduction limitation perhaps enabling the donor to make additional charitable contributions.
  6. For high income taxpayers: The revived Pease limitation will reduce itemized deductions based upon the lesser of 3% of AGI over ($309,900 married filing jointly or $258,250 single for 2015) or 80% of otherwise allowable itemized deductions. Again, the higher the taxpayer’s AGI, the more tax liability will be incurred in this case through reducing itemized deductions.
  7. For high income taxpayers: Personal exemptions ($4000.00 in 2015) will be reduced by 2% for every $2500.00 or portion thereof that AGI exceeds a threshold for a given filing status. This phase-out begins at the same income levels cited at 6) above and are fully phased out at $380,750 single and $432,400 married filing jointly.
  8. The amount of Social Security benefits that are taxable is calculated using a formula based on AGI. The higher a taxpayer’s AGI, the more of his/her Social Security benefit may become taxable.
  9. Medicare premiums: Medicare premiums, specifically parts B and D, are determined based upon a formula using adjusted gross income. The higher one’s AGI the higher the premium assessed.
  10. Tax credits: Many tax credits (tax credits are a dollar for dollar reduction in tax liability and, as such, are more valuable than a deduction) are phased out as AGI increases

5) May a charitable IRA rollover gift be used to satisfy a donor’s existing pledge?

Yes, a charitable IRA rollover gift may be used to satisfy a donor’s existing pledge; however, it cannot be used to fund a charitable gift annuity or charitable remainder trust.

6) May a charitable IRA rollover gift be designated for a specific UWPV purpose such as Community Impact or Education?

Yes, a charitable IRA rollover gift may be designated for a specific UWPV purpose.

7) In addition to making a lifetime charitable IRA rollover gift to UWPV, may a donor also designate UWPV as the beneficiary of that IRA account?

Yes, designating a charitable organization as beneficiary of an IRA or other retirement plan is common because such an asset is viewed as undesirable from a tax perspective as it is subject to potential estate tax in a decedent’s estate and the remaining account value is income taxable to an individual beneficiary whereas, if paid to UWPV, the IRA’s value is removed from the decedent’s estate and being that UWPV is tax exempt, the remaining account value will be received income tax free.

Steps For Making a Charitable IRA Rollover Gift to UWPV

We have made this process as seamless as possible by providing you with two sample form letters downloadable from our website. Simply fill in the required information and either mail or fax them.

First: using the sample letter to Administrators/Trustees, fill in the required information in the blank spaces provided and mail or fax to your IRA Administrator or Trustee. Your IRA Administrator or Trustee may ask you to complete its own charitable IRA rollover authorization form before processing your request. If so, promptly complete and return it especially if year-end is approaching.

Second: using the sample letter to UWPV, fill in the required information and mail or fax to UWPV indicating your gift intention. Once received, we will be watching for your charitable IRA rollover gift so that we may promptly substantiate it in writing to you.

If you are contemplating additional IRA rollover gifts to UWPV in 2016 or plan to make gifts from multiple IRA accounts, simply use the two sample letters for each separate transaction.

Summary: In the absence of the charitable IRA rollover, many IRA owners did not use their IRA accounts for lifetime charitable giving simply because of the myriad of undesired tax pitfalls that could impose increased tax liability and additional costs. Now they can! The charitable IRA rollover provides a great opportunity for IRA funds to be used in charitable giving.

Questions should be directed to Steven Toth, JD, MS, CLU, ChFC at UWPV
Office: 413-693-0237

Disclaimer: United Way of Pioneer Valley does not provide legal, tax, accounting or other related professional advice. Such advice must be sought from the reader’s own advisors. The information provided here is for general informational purposes only.



Financial Literacy Task Force Report Delivered

Last week, the Financial Literacy Taskforce presented their findings to Beacon Hill. Our own Sylvia deHaas-Phillips was part of the team, and a PDF of the full report can be found here. The team found that a lack of access to tools and information necessary for financial success endangers the state’s economy. This year, the UWPV and their partners have helped open three Thrive Financial Success Centers aimed at solving this problem.

Now is the Time for Year-End Giving

The Time is Now for Year-End Giving

With the 2015 calendar year drawing to a close, an easy and rewarding way to help you achieve both your financial and philanthropic objectives is to increase deductions on your federal income tax return through charitable giving. Timing and attention to requirements is critical, though! Some types of gifts must be received by us before the year’s end. Donors must pay close attention as to the type of gift, the method by which it is transferred, and the applicable deadlines.

Below are the deadlines that must be met for different types of gifts to comply with IRS requirements and allow for gift processing and acknowledgement so that the donor may treat the gift for 2015 tax purposes.

Cash or Check

1) Gifts of cash or check hand delivered to our office by noon on December 30.

2) Gifts made by check dated on or before December 31 and mailed via the U.S. Postal Service with a postmark stamped on or before December 31.

3) Checks sent by a medium other than U.S. mail (such as FedEx or UPS) must be received at our office by noon on December 31.

Credit Card

Credit card gifts are effective on the date your card is charged (allowing time for the charge to be completely processed), thus:

1) Credit card gifts mailed via U.S. Postal Service, FedEx and UPS must be received at our office by close of business on December 28.

2) Credit card gifts via telephone must be completed by close of business on December 28.

3) Credit card gifts made online must be completed by December 28.

Publicly Traded Appreciated Securities

The effective date of the gift depends upon how the securities are transferred—hand delivered, U.S. mail, FedEx, UPS, private courier, or electronic transfer—and who they are delivered to. Privately held stock and mutual fund shares typically require more time and may not be able to meet the deadline of December 31. Publicly traded securities, however, should not be a problem.

For detailed information on how to gift securities to the United Way of Pioneer Valley (UWPV), you may access our one page procedure sheet on the UWPV website by clicking here. The form includes the name and contact information of our local stockbroker representative. The gift must be credited to the UWPV account by close of our stock brokerage firm’s business on December 3to count as a 2015 gift.

Gifts from an IRA

These gifts can be made in potentially either of two ways: the IRA charitable rollover (restricted to IRAs only) if legislatively enacted for calendar year 2015 or by making a withdrawal followed by a charitable gift from an IRA or other qualified retirement plan including 401(k), 403(b), and Keogh plans as examples.

The IRA charitable rollover provides a simple, tax advantaged method for those over age 70 ½ to make a charitable gift. Its extension for 2015, however, is bogged down in Congress. A vote is scheduled for December 11. Timing, deadlines and other requirements will be dependent upon final statutory language.

The rollover procedure calls for a direct transfer from the donor’s trustee or IRA administrator to the charitable organization. As such, the amount of the gift—up to a $100,000 maximum—is not taken into income nor is a corresponding deduction available. It may be used, though, to satisfy a donor’s required minimum distribution (RMD) for 2015. This gift is called a qualified charitable distribution or QCD. The rollover provision has a history of being re-enacted at the last minute, so it is most likely to be available for 2015, but not as of this writing. Its status will be publicized once Congress acts.

As an alternative, a charitable gift may be made via an IRA withdrawal followed by a subsequent gift to a charitable organization (remember there is a 10% premature distribution penalty if the donor is younger than 59½ and required minimum distributions must begin by age 70½). This alternative works with qualified retirement plans as well as IRAs. In this case, the withdrawal amount must be included in the donor’s income, and, assuming this amount is gifted to charity, a corresponding deduction is available to “zero out” the transaction. If your gift is made by check, refer to the section above entitled gifts made by cash or check.

Note: The potential downside of this method is that the donor’s adjusted gross income will be inflated by the amount of the withdrawal even though subsequently deducted. Adjusted gross income is a threshold upon which a number of deductions, exemptions and credits are based, and this may negatively impact some donor/taxpayer’s income tax liability. The 50% of adjusted gross income deduction limitation also applies to non-IRA charitable rollover gifts.

Roth IRA Conversion during 2015

Another strategy that some individuals incorporate into their long range financial plan, but that creates a current income taxable event is a Roth IRA conversion. If you converted your traditional IRA to a Roth IRA during 2015, you will have triggered additional income tax liability. A charitable gift made in the same calendar year as a Roth conversion can provide a deduction that can reduce this increased liability. A window of opportunity exists if you have not considered this tax reduction idea. If your gift is made by check, refer to the section above entitled gifts made by cash or check.

SUMMARY: Year-end charitable giving provides individuals with an opportunity to obtain desired, last minute tax deductions while advancing their philanthropic objectives; however, close attention must be paid as to the type of gift, the method by which it is transferred, and the deadline that must be met for the gift to qualify as being made and deductible in 2015.

Questions should be directed to Steven Toth, JD, MS, CLU, ChFC at UWPV.

Office: 413-693-0237


 Disclaimer: United Way of Pioneer Valley does not provide legal, tax, accounting or other related professional advice. Such advice must be sought from the reader’s own professional advisors. The information provided here is for general informational purposes only.

UWPV and Partners Open Third Thrive Center

The Thrive Center @ Springfield Technical Community College Opens 

Springfield, Mass.— Today, a new Thrive Financial Success Center opened at the Springfield Technical Community College (STCC). Thrive is a collaborative effort between United Way of Pioneer Valley (UWPV) and STCC to provide financial education and support services to students and community residents. Thrive@ STCC is supported by PeoplesBank , MassMutual Financial Group, the Irene E. and George A. Davis Foundation, United Way of Pioneer Valley, and the STCC Foundation.

“After the success of the Thrive Financial Success Centers at Holyoke Community College and in downtown Holyoke, we are thrilled to open a third Thrive Center at Springfield Technical Community College,” Dora D. Robinson, President and CEO, United Way of Pioneer Valley said. “At the United Way of Pioneer Valley, we believe basic financial literacy should be a key aspect of everyone’s education. No career goal or life’s ambition should be hindered because a person doesn’t know how to balance their checkbook or maintain a good credit rating.”

Thrive@ STCC anticipates it will serve 400 individuals in its first year of operation. Program offerings include confidential benefits screening and enrollment; money skills class; individual financial coaching sessions; free income tax prep through the Volunteer Income Tax Assistance (VITA) program; links to workforce development and training workshops; and MassMutual’s LifeBridge program, a free life insurance program.

Thrive Centers currently operate in partnership with the United Way at Holyoke Community College and at the Picknelly Adult and Family Education Center in downtown Holyoke.

“Building financial awareness and planning skills is essential to our students’ and our community’s economic prosperity,” said STCC President Ira H. Rubenzahl. “Many of our students are over burdened with outside financial struggles. Coupling career guidance with access to financial coaching will assist Thrive participants to make informed decisions that will make their lives easier, allow them to remain focused on their studies, and prepare them for future employment.”


VITA Needs You!

Volunteer Income Tax Assistance (VITA) relies on dedicated volunteers to provide free tax services to low and moderate income residents of Hampden county each year from mid-January through mid-April. Volunteers are trained by the IRS.

We need volunteers to:

  • prepare taxes
  • greet clients
  • translate
  • coordinate VITA sites

To sign up, contact one of the following agencies:

Springfield Partners for Community Action
721 State Street, Springfield, MA 01109

Valley Opportunity Council
35 Mt. Carmel Ave, Chicopee, MA 01013


VITA is a project supported by these organizations:



Year End Tax: Giving Appreciated Securities/Stock

As year–end approaches, tax saving strategies become widely publicized. One of the most popular strategies available to taxpayers who itemize is to make a gift to a qualified charitable organization. Charitable gifts made by year’s end entitle a donor to an income tax deduction.

While a gift in cash, via check or credit card to the United Way of Pioneer Valley (UWPV) is always welcome during the holiday season, donating appreciated securities (shares of stock with significant gains) is frequently overlooked and offers the donor both a deduction plus a savings of capital gains tax applicable when the securities are sold.

Gifting of appreciated securities to UWPV is relatively simple. A one-page procedures sheet is available on the UWPV website, or simply give us a call and we will promptly mail it to you.

How It Works

Assume Arthur purchased 100 shares of stock for $10,000.00 ($100.00 per share) twenty years ago. The stock is now worth $50,000.00. If Arthur decides to sell the stock in 2015 he would have to include a capital gain of $40,000.00 into income. Depending upon Arthur’s federal income tax bracket, he could incur additional capital gains tax of up to $8000.00 (20%). (To simplify this example, neither the Massachusetts capital gains tax nor 3.8% Medicare surtax are considered.)

Rather than sell the stock, if Arthur gave it to UWPV, he would be entitled to a deduction of $50,000.00–an amount equal to the full fair market value of the stock. Since he is giving the stock, rather than selling it, he would incur no capital gains tax. Again, depending upon his federal tax bracket, he could enjoy a tax savings of as much as $19,800.00 in the top bracket of 39.6% (and as examples, tax savings of $17,500.00 in the 35% bracket, $14,000 at 28%, and $7500.00 at 25%). This potential tax savings may offset some of Arthur’s other taxable income thus mitigating his overall 2015 federal tax liability. 

Points to remember:

1) A donor’s federal income tax bracket determines the rate and amount of capital gains tax when appreciated stock is sold and the tax savings obtained if the stock is donated to charity.

2) The deduction for a gift of appreciated securities/stock to charity is limited to no more than 30% of the donor’s adjusted gross income in the year of the gift, but any remaining unused deduction may be taken each year up to the 30% limit for up to an additional five years.

If you want to make a gift, but own stock that has a loss as opposed to a gain, it is recommended that you sell it first enabling you to take any loss on your income tax return and gift the net proceeds in cash to UWPV.

The prevailing practice among charitable organizations including UWPV is to liquidate gifted stock.

Planning ideas funded by gifts of appreciated securities/stock

1) A donor age 65 or older may establish a charitable gift annuity ($25,000.00 minimum) that will pay him (and spouse) a joint and survivor, guaranteed, fixed income for life.

2) A donor in mid-to-late career (typically approximate minimum age 45 to 50) may establish a deferred charitable gift annuity ($25,000.00 minimum) to supplement their retirement plan income. A joint and survivor option is also available.

Note: Charitable gift annuities and deferred charitable gift annuities are governed by federal tax law. Most notably, since income is being paid to the donor based largely upon the amount of the gift and donor/annuitant’s age, the amount of the donor’s deduction must be reduced to less than full fair market value based upon an IRS formula.

Note: If you want to explore a charitable gift annuity or deferred charitable gift annuity, please speak with UWPV first to obtain a proposal as your decision to establish a gift annuity must be made prior to or at the same time as your gift of stock. United Way Worldwide (not UWPV) enters the gift annuity agreement with the donor. The financial backing of the national United Way organization as payor is a strong incentive to establish a gift annuity.

3) A donor may use a gift of stock to provide premium for a new or existing life insurance policy owned by or transferred to UWPV.

4) A donor may establish a charitable remainder trust. Although a charitable remainder trust provides the same basic benefits to the donor and charitable recipient as a charitable gift annuity, they are expensive to create and administer thus requiring a large gift of stock to be economically feasible.

5) A donor may use a gift of stock to fulfill a pledge obligation.

A year end gift of appreciated securities to UWPV not only provides you with significant tax benefits and savings, but shows your commitment to improving the lives of the residents of Pioneer Valley.

Questions should be directed to Steven Toth, JD, MS, CLU, ChFC at UWPV.

Office: 413-693-0237
Cell: 804-380-5372

Disclaimer: United Way of Pioneer Valley does not provide legal, tax, accounting or other related professional advice. Such advice must be sought from the reader’s own advisors. The information provided here is for general informational purposes only.



Second Thrive Center to Open in Holyoke



HOLYOKE – Holyoke Community College, the United Way of Pioneer Valley and PeoplesBank will celebrate the grand opening of their second Thrive financial success center on Tuesday, November 10, at 11 a.m..

The new Thrive center will be located on the first floor of the Picknelly Adult and Family Education Center at 206 Maple St., Holyoke, and will be open on Tuesdays and Fridays from 8:30 to 4:30.

Thrive offers free and confidential screening for public benefits, individual financial coaching sessions, money skills classes, workforce training workshops and free tax preparation services to both HCC students and members of the community.

“This new Thrive office builds on the success we’ve experienced with the first Thrive center here on the HCC campus,” said HCC President Bill Messner. “It makes terrific sense to bring these same financial services into the center of downtown Holyoke, closer to people who might need them.”

Since it opened in February on the second floor of HCC’s Frost Building, Thrive@HCC has served more than 350 people, 80 percent of them HCC students and the rest local residents.

Scheduled to speak at the Nov. 10 grand opening are HCC president Bill Messner; state representative Aaron Vega, Holyoke mayor Alex Morse, United Way president Dora Robinson, PeoplesBank executive vice president Thomas Senecal, and Thrive coordinator Crystal Colon. For more information about Thrive and its services, please go to

Comcast Announces Fifth Back-to-School Kickoff for Internet Essentials

Comcast Logo




Comcast today announced several significant enhancements and milestones for Internet Essentials, the nation’s largest and most comprehensive high-speed Internet adoption program. The company said it plans to double the service’s download Internet speed, offer subscribers a Wi-Fi router for no additional cost, and conduct several pilot programs for low-income senior citizens. (Read More)

Stuff the Bus Kick-off Event 7/24!

Join us Friday, July 24 from 10:00 a.m. to 12:00 p.m. inside the Holyoke Mall near Sears/Guest Services (50 Holyoke Street) for a FREE, family friendly kick-off event for Stuff the Bus!

WHO: United Way of Pioneer Valley, Peter Pan Bus Lines, Stuff the Bus sponsors and special guests including Holyoke Mayor Alex Morse

WHAT: Kick-off event for United Way of Pioneer Valley Stuff the Bus program

WHEN: Friday, July 24, 2015 from 10:00 a.m. to 12:00 p.m. (media event will run from 10:00 a.m. to 10:30 a.m.)

WHERE: Holyoke Mall at Ingleside, 50 Holyoke Street, inside in front of Sears and Guest Services

WHY: To raise public awareness and collect donations for Stuff the Bus program. The United Way of Pioneer Valley, in partnership with Peter Pan Bus Company, is collecting school supplies to fill over 1,300 backpacks for children who are homeless in Springfield, Holyoke, Westfield, Chicopee, West Springfield, and South Hadley.

DETAILS: This is a family friendly event that will feature arts & crafts and coloring tables, free and discounted passes to Six Flags New England, raffles for museum passes and gift cards, and a visit from Little Pete the Bus (from Peter Pan Bus Lines). The media portion will run from 10:00 a.m. to 10:30 a.m.; the family friendly activities will start at 10:30 a.m. and run through 12:00 p.m.

Opening Doors in Western MA: Ending Homelessness

Western MA Opening Doors sets forth a framework to end homelessness in the region by stating our goal and defining where we are, where we want to go, and how we will get there. Made possible with support from the Commonwealth, the Western MA Network to End Homelessness created this Plan to drive ongoing collective impact work to meet the goals of “Opening Doors: the Federal Strategic Plan to Prevent and End Homelessness.”

Opening Doors in Western MA 2015 Final June 30 (1)

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