Giving Through an IRA Charitable Rollover
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November 7, 2017Giving Through an IRA Charitable Rollover
Are you or someone you know age 70 ½ or older?
The IRA charitable rollover allows individuals age 70½ and older to make a gift of a lifetime during their lifetime. Donors can make a qualified charitable distribution from their IRA directly to a qualifying charity, such as the Community Foundation, without declaring the distribution as income.
Support your charitable interests in the community with a tax-free gift, up to $100,000, from your IRA to the DeKalb County Community Foundation.
If this sounds like an option for you or someone you know, here is a recap of the IRA charitable rollover rules:
- You can make a direct transfer if:
- You are age 70½ or older on the day of the gift.
- You transfer up to $100,000 directly from your IRA to one or more qualified charities. This opportunity applies only to IRAs and not to other types of retirement plans.
- You pay no income tax on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your tax deductions.
- The gift can satisfy all or part of your required minimum distribution (RMD) for the year.
- The gift may be used to create a new charitable fund or to support an existing fund among the following options:
- Designated Funds – These funds provide an annual source of income to the organization(s) of your choosing, helping carry on its important work for years to come.
- Field of Interest Funds – These funds create grants that meet the needs of a particular field or geographic area that is of interest to you, the donor.
- Scholarship Funds – The DeKalb County Community Foundation administers more than 65 scholarship funds supporting education, professional development, and other education opportunities.
- Community Impact (Undesignated) Funds – These funds provide the Community Foundation Board with grant dollars to respond to needs and opportunities throughout DeKalb County – where it’s needed most!
- The gift may not be used to fund a gift annuity, charitable remainder trust, donor advised fund, or private foundation.
- You cannot receive any goods or services in return for the rollover gift in order to qualify for tax-free treatment.
Next Steps:
Contact your professional advisor to determine if the IRA Charitable Rollover is a good option for you. For questions, additional information, or to discuss your charitable options, please contact Community Foundation Executive Director Dan Templin at 815-748-5383 or dan@dekalbccf.org.
Why do donors give IRA assets to their community foundation?
After decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of non-spousal beneficiaries; heirs may receive less than 50 percent of IRA assets passed on to them through estates. Instead, IRA holders may choose to leave their IRAs to qualified charitable organizations such as the DeKalb County Community Foundation—choosing charity over taxes.
What are the tax implications of an IRA charitable rollover gift?
Because the transfer occurs directly from your IRA to a qualified charity, you pay no income tax on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your tax deductions. The gift can satisfy all or part of your required minimum distribution (RMD) for the year.
To what charities can an IRA charitable rollover be made to?
IRA charitable rollovers must be made directly to a 501(c)(3) organization such as the DeKalb County Community Foundation.
Are there any IRA transfers to the community foundation that DO NOT qualify for preferred tax treatment?
Yes. Transfers to supporting organizations and Donor Advised Funds do not qualify. Also, IRA charitable rollover transfers cannot be made to charitable annuities, charitable lead trusts and charitable remainder trusts. Because such transfers do not count as qualified distributions under these special rules, the donor will have to first recognize those distributions as income. The donor’s charitable deduction must then be calculated as a regular itemized deduction.
How can an IRA gift be made?
IRAs are typically held by a financial service or trust company. Please contact your IRA administrator directly to initiate the transfer to the DeKalb County Community Foundation.
