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.
John is 71 wants to make a contribution to the Catholic Community Foundation. 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 Catholic Community Foundation. 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 Catholic Community Foundation will be counted toward his annual minimum required distribution and he will not pay income tax on the portion given to charity.
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 Catholic Community Foundation. 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 Catholic Community Foundation.
To what charities can I make gifts?
Tax exempt organizations that are classified as 501(c) (3) charities, including the Catholic Community Foundation, 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 Catholic Community Foundation 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 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?
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.
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