IRA Charitable Rollover Gifts Permanently Extended

Did you know that the IRA Charitable Transfer benefits donors aged 70 1/2 and up?

The IRA Charitable Transfer is an excellent way to make gifts and receive tax benefits in return. As you plan your required minimum distributions for this year, consider using your IRA account to make the most of your charitable giving. You receive a tax benefit even if you take the standard deduction! It’s important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to share this gift plan with your financial advisor.

To qualify

  • You must be age 70 1/2 or older at the time of gift.
  • Transfers must be made directly from a traditional IRA account by your IRA administrator to Seton Hall University.
  • Gifts must be outright. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities do not qualify.
  • Gifts from 401k, 403b, SEP and other plans do not qualify. Ask your financial advisor if it would be right for you to create a traditional IRA account so you can benefit from the IRA Charitable Transfer.

Tax Benefits

  • Donate up to $100,000 annually.
  • IRA Charitable Transfers are excluded gross income for federal income tax purposes on your IRS Form 1040. You receive no charitable deduction
  • Count towards your required minimum distribution for the year in which you made the gift.

Example

John is 73 and wants to contribute $20,000 to Seton Hall University. He has somewhat over $500,000 in his IRA, and his minimum required distribution would be about $20,000. He can authorize the administrator of his IRA to transfer $20,000 directly to Seton Hall University in a "qualified charitable distribution" or QCD. John will not be eligible for a charitable income tax deduction, but because the entire amount of the QCD is excluded from income, he still receives tax savings. The $20,000 distributed to Seton Hall University will be counted toward his annual minimum required distribution (MRD), and he will not pay income tax on the portion given to charity.

Note: 73 is the age when required to take out the RMD. The earliest age John can withdraw voluntarily from his retirement is 59.5. And the earliest he can make a QCD is 70.5. These numbers can get confusing because if John is between 70.5 and 73, he can still make a QCD but will not enjoy the tax advantage if he is not taking out a distribution.

Questions and Answers

What’s the IRS Rule?

The IRA Charitable Transfer allows individuals age 70 1/2 and older to make direct transfers totaling up to $100,000 per year to 501(c)(3) charities, without having to count the transfers as income for federal income tax purposes. No charitable deduction may be taken, but distributions will qualify for all or part of the IRA owners required minimum distributions.

Who qualifies?

Individuals who are age 70 1/2 or older at the time of the contribution.

How much can I transfer?

$100,000 per year. The transfer must be outright to charity.

From what accounts can I make transfers?

Transfers must come from your IRAs directly to Seton Hall University. If you have retirement assets in a 401k, 403b etc., you must first roll those funds into an IRA, and then you can direct the IRA administrator to transfer the funds from the IRA directly to Seton Hall University.

To what charities can I make gifts?

Tax exempt organizations that are classified as 501(c) (3) charities, including Seton Hall University, to which deductible contributions can be made.

Can I use the IRA Charitable Transfer to fund life-income gifts (charitable gift annuities, charitable remainder trusts, or pooled income funds), donor advised funds or supporting organizations?

No, these are not eligible.

How will Seton Hall University count the gift?

We will give you full credit for the entire gift amount.

What are the tax implications to me?

  • Federal — You do not recognize the transfer to Seton Hall University as income, provided it goes directly from the IRA administrator to us; therefore, you are not entitled to an income tax charitable deduction for your gift.
  • State — Each state has different laws, so you will need to consult with your own advisors. Some states have a state income tax and will include this transfer as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their state income tax on the federal income or federal tax paid. Still other states have no income tax at all.

Does this transfer qualify as my required minimum distribution?

Once you reach age 73, you are required to take required minimum distributions from your retirement plans each year, according to a federal formula. IRA Charitable Transfers count towards your minimum required distribution for the year in which you make the gift.

Can my spouse also make an IRA Charitable Transfer?

Yes, every individual who is the owner of a traditional IRA account can use the IRA Charitable Transfer for up to $100,000 each year.

How do I know if an IRA Charitable Transfer is right for me?

  • Share this information with your financial advisor. Our office can provide further information and examples of this gift plan. Call us. We would be delighted to help.

What is the procedure to execute an IRA Charitable Transfer?

We offer a sample letter you can send to your plan provider to initiate the transfer. Please let your plan administrator know that this gift must be sent prior to December 31 to qualify as an IRA Charitable Transfer. Make sure that you contact us when you direct the transfer so we can look for the check from your IRA administrator.

For more information, please contact us.

Important: Be sure to check with your financial advisor to determine whether this gift plan is right for you. This information is not meant as tax or legal advice.