Thanks to Congressional action in December 2015, donors with retirement assets in IRAs now have an effective way to reduce taxes and support their favorite charities, including funds at community foundations by utilizing the IRA Charitable Rollover.
What is an IRA Charitable Rollover?
The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing particular donors of age 70½ and older to exclude from taxable income—and count toward their required minimum distribution—certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including CLDI.
The provision allows individuals who are 70½ or older to direct their IRA administrator to send up to $100,000 per year to a qualified charity, instead of to the account holder. Individuals may direct part of their Required Minimum Distribution (RMD), all of their RMD, or additional amounts, up to $100,000 per year.
How Does this Save Me Money on Taxes?
Individuals who must take a minimum annual distribution from IRA accounts must also pay taxes on that income. The IRA Charitable Rollover Provision is the only way that individuals who are 70½ or over can avoid taking the mandatory distribution and therefore, avoid paying taxes on that distribution.
- If you have “maxed-out” your charitable deductions: a qualified charitable IRA distribution operates separately from the percentage rules that limit the tax benefit of individual charitable giving. Therefore, for individuals inclined to give more, the charitable IRA rollover is an ideal option. IRA rollover gifts do not count toward the 50% of adjusted gross income limitation on charitable gifts of cash.
- If you are a non-itemizer: Because qualified charitable distributions from IRAs do not require the donor to claim an income tax charitable deduction, non-itemizers can also take the equivalent of a charitable deduction via the IRA rollover and indicate that on the front page of the IRS Form 1040 without itemizing.
Would I Get to Claim a Deduction for Making a Charitable Gift?
No. Donors avoid recognition of taxable income by making the gift, but do not receive an additional charitable deduction. Individuals may either forego the distribution and have it sent directly to the CLDI OR they can take the mandatory distribution, make a charitable gift, and then get the charitable gift deduction. Donors can’t do both.
Can I Make a Charitable Rollover Gift Using Other Types of Retirement Accounts?
No. The Charitable Rollover is only available using IRA accounts, not 401(k) or 403(b) accounts.
I’ve Already Taken My Mandatory Distribution This Year, Can I Send it to the Charity and Have it Qualify as an IRA Charitable Rollover Gift?
No. Only the IRA trustee can transfer gift amounts to a qualified organization. IRA owners who take the distribution and then contribute the money to charity will be taxed on the withdrawn amounts. However, donors can make a direct or planned gift to charity and still qualify for the federal tax deduction and possibly the Montana Endowment Tax Credit
Are There Limits to What I Can Support?
Yes. Charitable Rollover gifts must be made to 501(c)(3) charitable organizations. Also rollover gifts cannot be used to fund charitable gift annuities or charitable remainder trusts (or any other split-interest gifts) and cannot be transferred to donor advised funds. Additionally, 509(a)(3) supporting organizations are not eligible recipients.
If I Made a Charitable Rollover Gift in Other Tax Years, Can I Do it Again for the Current Tax Year?
Yes. The current law extends the charitable IRA rollover provision indefinitely – with no expiration date – allowing individuals to make qualifying gifts every tax year.
Where Do I Start?
Start by contacting your IRA Administrator now and give them our CLDI Charitable Tax ID Number and make the IRA rollover work for you! Your gift needs to be made before December 31.
CLDI Charitable Tax ID Number: 81-0397424
Thank you for your partnership with CLDI and support of our endeavors to assist the Billings area. Every gift makes a significant impact!
