This summary provides information for donors considering a qualified charitable distribution from an IRA, commonly referred to as an IRA charitable rollover gift. A bill was signed into law by the president on December 18, 2015, making the IRA charitable rollover permanent.
Among the provisions of the bill is an exclusion from gross income for income tax purposes of up to $100,000 (per IRA account owner) for “qualified charitable distributions” from an Individual Retirement Account (IRA). The distribution will count toward an individual’s Required Minimum Distribution (RMD). The statutory requirements for a “qualified charitable distribution” are as follows (for more information see http://www.irs.gov/Retirement-Plans/Charitable-Donations-from-IRAs) :
- The distribution must be made from an IRA (other retirement accounts are not eligible).
- The recipient must be an eligible charitable organization.
- The IRA’s owner must be at least age 70½.
- The distribution must be made directly to the charity by December 31, 2015. (See below.)
- The distribution must otherwise be fully deductible as a charitable contribution.
- The distribution must otherwise be included in gross income.
Frequently Asked Questions
What are the deadlines to complete a gift? Distributions by wire transfer must be received in Princeton’s account by December 31, 2015. Distributions by check must have a postmark (on the envelope) no later than December 31, 2015. Because of the high volume of year-end gifts, contact your IRA administrator as soon as possible to allow enough time for them to issue your gift before the end of December.
Sample transfer instructions by check or wire transfer may be found here.
Will there be an opportunity to make IRA charitable rollovers in early 2016 retroactive to the 2015 tax year, as was done in previous years? No. Eligible gifts for 2015 must be received or postmarked by December 31, 2015. However, the permanent extension means that IRA gifts are in effect for 2016 from the beginning of the year.
May I make a gift from my IRA if I have already taken my required minimum distribution (RMD)? Yes. You can exclude up to $100,000 (per IRA account owner) from gross income for qualified charitable donations. The donation counts toward your RMD but is not limited by your RMD.
May I contribute more than $100,000 to a qualified charity from an IRA? Yes, however, the law limits the exclusion from gross income to $100,000. Charitable contributions from an IRA in excess of the $100,000 must follow the general rules pertaining to percentage limitations and itemized contribution reductions.
Are IRA distributions already taken by me eligible to gift as qualified charitable distributions? No. However, you can make gifts from IRA distributions that do not meet the requirements of a qualified charitable distribution. In such cases, the IRA distribution would be recognized as income for income tax purposes and typically would be eligible for a federal income tax charitable deduction.
Is my IRA charitable rollover gift eligible for an income tax charitable deduction? No. Donors of qualified IRA gifts do not receive a federal income tax charitable deduction for the IRA gift, as they are not being taxed on the withdrawal.
Are there other tax advantages to gifting through a qualified IRA? Yes! Qualified IRA gifts are not subject to percentage of adjusted gross income (AGI) limitations for charitable contributions and are not reportable as income for federal income tax or for Social Security income purposes. The amounts withdrawn are not subject to state income taxes in most states. Donors who do not itemize deductions on their federal income tax returns may benefit from qualified IRA gifts for their exclusion from gross income. Amounts withdrawn from an IRA account are removed from the donor’s taxable estate. Talk to your tax advisor to see which benefits apply to your specific situation.
What types of charitable gifts are not eligible for IRA charitable rollover gifts? Most gifts to a private foundation, donor-advised fund, or supporting organization are not eligible. Gifts to a charitable remainder trust, lead trust, pooled income fund, or charitable gift annuity are not eligible. Gifts for which the donor receives a benefit that reduces the donor’s tax deduction (such as tickets or dinner) are not eligible.
Are gifts from retirement plans other than an IRA eligible? No. However, donors may be able to make qualified transfers from their pension or retirement plan to their IRA, and then make a charitable gift from their IRA account.
This is not intended to be legal or tax advice. We encourage you to consult your own legal or tax advisor.