IRA Charitable Rollover

Background 

Since 2006, Congress has allowed individuals over 70 ½ years old to make charitable gifts from their IRAs directly to certified nonprofit organizations. With the Protecting Americans from Tax Hikes Act of 2015, the benefit of IRA charitable rollover giving was permanently added to the tax code. This provision allows qualified individuals to make charitable gifts directly from their IRA to the certified nonprofits of their choice without incurring federal income taxes on the withdrawal. Qualified individuals may make significant charitable gifts in their lifetime directly from an asset that would normally be subject to taxation as a part of an estate.

Qualifications

The donor must be at least 70 ½ years old at the time of the gift. Transfers can be made only directly from the IRA to the nonprofit of your choice. Personally withdrawing the funds and then donating to the nonprofit will not result in special tax benefits to you. This benefit is also reserved solely for IRAs. If you have another type of retirement account, you will have to roll over those funds into an IRA before enjoying these giving benefits. You may make up to $100,000 in charitable gifts each year from your IRA. You must donate directly to a qualified charitable organization such as NAMI and not to a donor-advised fund or foundation.

Benefits

You may make up to $100,000 in charitable gifts directly from your IRA without incurring any income taxes on the withdrawal. The donated funds will not be included in your gross income for federal income tax purposes. As these gifts are given tax-free, there is no additional income tax charitable deduction available for these donations. This donation will also count toward your required minimum distribution for the year from your IRA. As you plan your minimum required distribution for the year, if you find yourself not needing the money that the government requires you to withdraw, consider using it for a charitable gift instead.

Example

Suppose that Mary is 76 years old and has $500,000 in her IRA. Mary wants to donate $20,000 to NAMI and take out $5,000 for personal expenses. Mary can ask her IRA administrator to make the $20,000 gift directly to NAMI without paying any federal income taxes on the donation. Mary will then pay income taxes on the $5,000 that she wants to withdraw for her own use. With the combination of a personal withdrawal and a charitable gift, Mary has met her minimum required distribution without having to pay taxes on money that she did not need for her personal use.

More Information

For more information about IRA charitable rollover giving, please contact your IRA administrator or Emily Tracy at 703-516-7992.