IRA Gift – Qualified Charitable Distributions
MAKE TAX-FREE GIFTS FROM YOUR IRA!
The SECURE (Setting Every Community Up for Retirement Enhancement) Act allows you to transfer up to $100,000 per year using funds from your individual retirement account (IRA) resulting in several positive tax effects. As your financial situation is unique, please consult with your financial advisor or tax professional for guidance.
Are you age 70 ½ or older, charitably inclined and looking for the best way to help your neighbors in need during the Coronavirus crisis? If so, consider directing a Qualified Charitable Distribution (QCD) from your traditional IRA to CET. Even though the CARES Act allows you to waive your Required Minimum Distribution (RMD) for 2020, you can still donate through your IRA using your QCD.
You may contribute funds from your IRA if:
- You are age 70½ or older at the time of the gift.
- You transfer directly from your IRA. This opportunity applies only to IRAs and not to other types of retirement plans.
- You transfer the funds outright to one or more qualified charities. The legislation does not permit direct transfers to charitable trusts, donor advised funds, charitable gift annuities or supporting organizations. The distribution must be made directly from the IRA to the charity. The IRA owner may take a check from the IRA trustee/custodian made out to the charity and deliver it but cannot, at any time, have access to the funds.
- You make your gift by December 31 for the gift to qualify this year.
Common questions from donors:
A1. No. The legislation requires you to reach age 70½ by the date you make the gift.
A2. Yes, absolutely. If you have not yet taken your required minimum distribution and are required to do so, the QCD may satisfy all or part of that requirement. The SECURE Act, passed in late 2019, increased the age at which IRA owners must begin required minimum distributions from 70½ to 72; however, the age for making a QCD remains age 70½. This creates a unique planning opportunity.
A3. No. If you are not currently contributing to your IRA, you may give any amount under this provision, up to $100,000.
A4. No. Under the law, you may give a maximum of $100,000. For example, you and may give each organization $50,000 this year or any other combination that totals $100,000 or less. Any amount of more than $100,000 in one year must be reported as taxable income.
A5. Yes. Direct rollovers to a qualified charity may only be made from an IRA. If you have a pension, profit sharing, 401(k) or 403(b) plan, you must first roll over all or a portion of that plan to an IRA. You may then use the funds from the IRA to complete the direct IRA rollover to a qualified charity. To determine if a rollover to an IRA is available for your plan, speak with your plan administrator.
A6. If you have a spouse (as defined by the IRS) who is 70½ or older and has an IRA, he or she may also give up to $100,000 from his or her IRA if you are not currently contributing to it. Each IRA holder has their own limit. If you are currently contributing pre-tax income to your IRA, the maximum amount you may donate tax-free may be reduced.
A7. The QCD is not deductible as a charitable contribution if the IRA owner itemizes deductions. Because the QCD is not included in taxable income it cannot also be used to reduce taxable income through itemizing. That would be “double dipping.”
To report a QCD for your taxes when you do not itemize, follow this example. Let’s say you take a $10,000 RMD. You wish to allocate $3,000 as a QCD and $7,000 for you to use as income. You will receive a Form 1099-R reporting the IRA distribution. On your Form 1040, there is a separate line item for reporting the taxable portion of your QCD (line 4b).
Make your gift by December 31, for your gift to qualify this current year.
IRA Charitable Gift Request Form for IRA Administrator