Charitable IRA Rollover—The Basics

At long last, Congress has passed and the President has signed the Tax Increase Prevention Act that includes a provision making permanent, once and for all, an individual’s ability to make a charitable gift from his/her IRA. Donors may now rely upon this law in their future financial, estate and charitable planning.

The charitable IRA rollover is a special provision that allows gifts directly from an IRA to a public charity without the gifted amount being considered income to the donor. It should be of keen interest to different kinds of donors:

  • those who elect the standard deduction on their federal tax returns
  • residents of states, like Massachusetts and Connecticut, where charitable deductions cannot be taken on state tax returns
  • all other taxpayers who may likely incur greater tax liability and costs by virtue of their adjusted gross income being increased should they make an IRA withdrawal and charitable gift, rather than using the charitable IRA rollover.

Essential Information:

  • The IRA owner must be at least age 70 ½ before making the gift.
  • The gift may be made only from an IRA and certain Roth IRAs.
  • The gift may satisfy some or all of an IRA owner’s Required Minimum Distribution.
  • The gift may be applied to satisfy an existing pledge to UWPV.
  • The gift may be designated to support a specific UWPV initiative.
  • The gift removes that amount from the owner’s gross estate.
  • The only limitation is that the aggregate gift cannot exceed $100,000 annually—

– A donor may make multiple IRA rollover gifts to the same public charity throughout the year.
– A donor may make IRA rollover gifts using multiple IRA accounts.
– A donor may make IRA rollover gifts to multiple public charities.
– Husband and wife each have a $100,000 limit from their respective IRAs.

A charitable IRA rollover gift is considered a qualified charitable distribution (QCD). It is a direct transfer to a public charity made by the donor’s IRA Administrator or Trustee at the donor’s request. As a QCD, the gift is not income to the donor nor, logically, is the donor entitled to a deduction.

The charitable IRA rollover procedure eliminates taking an IRA withdrawal into income which would then have to be added to a donor’s adjusted gross income (AGI). AGI is a threshold for calculating deductions, exemptions, tax credits, the amount of Social Security benefits subject to tax and for determining premiums for Medicare parts B and D. By not increasing AGI, a donor may enjoy significant tax savings and lower costs.

The donor cannot receive ANY goods or services from the charity in consideration of the gift and the gift must be substantiated in writing by the charity. According to the IRS, if a good or service offered would reduce the charitable deduction if this were an outright gift, then the gift will not qualify as a QCD and the full amount must be taken into income thus increasing the donor’s AGI.

To help you make a charitable IRA rollover gift to UWPV, there is available online:

  1. A sample letter for you to send to your IRA Administrator/Trustee requesting that an IRA rollover gift be made,
  2. A sample letter for you to send to UWPV notifying us of your gift intention so that we may be on the lookout for it, and
  3. Should you want more detailed information there is an in-depth educational FAQ that may address your specific questions.

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

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.



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