Information Regarding IRA Charitable Rollover Provision

With the passage of the Consolidated Appropriations Act, 2016 (H.R. 2029) on December 18, 2015, individuals over age 70 ½ can make tax-free distributions from their IRA to qualified public charities. This is a permanent charitable tax giving incentive. Qualified charitable distributions from your IRA for 2018 are possible by making distributions until December 31, 2018.

For IRA withdrawals to qualify for tax free “rollover” to charity, the following must apply:

  • Distributions must be made from a traditional IRA or a Roth IRA by an individual at least 70 ½ years old.
  • The maximum amount eligible is $100,000 in each taxable year (and gift counts toward mandatory withdrawal amount).
  • Transfer of funds must be made directly to the charitable by the IRA trustee.
  • The funds cannot be used to establish a split-interest gift (such as a charitable gift annuity or charitable remainder trust).
  • The donor can receive no goods or services if value from the charitable organization in exchange for the gift.
  • The charitable organization must provide the donor with written verification of the contribution.

An IRA gift may be particularly attractive if:

  • The donor is unable to claim additional charitable deductions because of the 50% and 30% AGI limitations (these gifts are not subject to the limitations).
  • The donor does not itemize deductions (the donor will enjoy the equivalent of a charitable deduction).
  • The donor’s high income level causes the phase out of exemptions (the withdrawal will not add to the income).
  • The donor resides in a state that does not allow charitable income tax deductions (if withdrawal is excluded from state income tax).

Process for making a qualified charitable distribution:

  • Donor requests IRA trustee/ administrator to make a gift directly to the SSO.
  • Donor informs SSO of the intention to make a gift.
  • IRA trustee/administrator authorizes and sends gift.
  • SSO acknowledges receipt of gift to trustee/administrator.
  • SSO acknowledges receipt to Donor, warrants that SSO qualifies as a tax exempt organization and is neither a donor-advised fund nor a supporting organization and that no goods or services were or will be received in connection with the gift.

Notes that distributions from employer-sponsored retirement plans, such as Simple IRAs, 401(k)s, and 403(b)s, do not qualify (although it may be possible to transfer funds from such accounts to an IRA and then to charity). Also note that IRA rollovers may be includable in a donor’s income for state and local tax purposes and may not earn an offsetting charitable deduction, depending on state and local law.

In addition, please note:

  • Qualified charitable distributions from your IRA for 2018 are possible by making distributions until December 31, 2018.
  • This opportunity will be available for future years, as the IRA charitable rollover is now a permanent tax provision.
  • For further information, please contact your financial advisor.

Download a sample letter to request for Direct Charitable Distribution from an Individual Retirement Account.