Options for Tax-Savvy and Charitable IRA Distributions

Options for Tax-Savvy and Charitable IRA Distributions

If you are age 70½ or older...

you are eligible to transfer up to $100,000 tax-free from your IRA directly to qualified charities and have that amount count against your required minimum distribution. This provision applies only to IRAs and not to 401(k)s, 403(b)s and other similar qualified retirement plans.

IRA Charitable Rollover and Financial Planning

Your Options

Qualified charitable distributions from your IRA can be used to make a gift to The Community Foundation (and we greatly welcome such gifts!). With a gift of $10,000 or more, you may establish a named endowed fund or you may make a gift of any amount to an existing fund (such as the Community Now More Than Ever Fund). Please note, however, that this gift opportunity does not apply to donor advised funds or life income gifts, such as charitable gift annuities or charitable trusts, or to supporting organizations.


The IRA Charitable Rollover was made permanent in the PATH Act of 2015.


 

How it Works

  • You transfer up to $100,000 directly from your traditional IRA or ROTH IRA to one or more qualified charities.
  • 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 deductions.
  • The gift can satisfy all or part of the required minimum distribution for the year.
  • The gift can be used to create or add to a named endowed fund* at The Community Foundation to support general purposes, an area of interest or a specific nonprofit(s).

Who Benefits the Most?

An IRA Charitable Rollover may benefit:

  • Donors with significant assets in an IRA;
  • Donors who do not itemize deductions; and
  • Donors making large gifts relative to their income (it does not count against the usual percentage limitations on using charitable deductions).

Sample Scenario

profile: 

  • John, a retired professor, who is 70 ½  is required to start taking the required minimum distribution from his IRA account.
  • John has made successful investments which produce a good retirement income so he doesn’t need the IRS distribution for his daily living.
  • Also, John is currently in the 25% tax bracket, but the IRA distribution (counted as income) will push him into the 28% tax bracket and force him to pay more income tax.

opportunity: 

  • John transfers his IRA distribution directly to The Community Foundation.
  • Although he does not receive a charitable income tax deduction, because the distribution was transferred to a nonprofit organization, the transfer is not counted as additional income for John’s tax purposes. He remains in the 25% income tax bracket.
  • John creates a fund in honor of his parents that will benefit several local nonprofits he has supported throughout his working life.  As an endowed designated fund, the family fund at The Community Foundation makes yearly grants to the named nonprofits, forever. 
  •  As an alternative to starting a new fund, donors may also ask that their IRS distribution be added to existing endowed funds or to the “Community Now More Than Ever Fund” which can make immediate grants to local nonprofits. (Note: *The IRS does not allow donors to direct gifts from an IRA distribution to a donor advised fund.) 

If you're interested in discussing options further, please contact us for more information on how to take advantage of the IRA Charitable Rollover or to explore other ways of giving that might yield additional tax benefits while supporting the causes you care most about.

*Charitable rollovers may not be used for donor advised funds, supporting organizations, private foundations or charitable gift annuities.

Address

70 Audubon Street
New Haven, CT 06510
Directions

Contact

203-777-2386
ContactUs@cfgnh.org

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