December 2015 | Donor Update
Frequently Asked Questions about the Charitable IRA Rollover
Congress just made permanent the charitable IRA rollover. What is it?
The charitable IRA rollover is also known as a qualified charitable distribution. It’s a special provision that allows certain donors 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. This includes Community Funds, Inc. (and The New York Community Trust).
Donors age 70 1/2 or older may use this popular option to support public charities, including a gift to The Trust to support areas of their choice with contributions ranging from $100 to $100,000.
What gifts would qualify for a charitable IRA rollover?
A direct distribution from an IRA, technically termed a “qualified charitable distribution,” by a donor age 70 1/2 or older must be transferred from a traditional or Roth IRA directly to a public charity. This includes Community Funds, Inc. (The New York Community Trust). An individual taxpayer's total charitable IRA rollover gifts cannot exceed $100,000 per tax year.
What about the required minimum distribution?
If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.
Is an income tax deduction also available?
No. The gift would be excluded from income, so there is not additional deduction.
Why are Roth IRAs included? Aren't withdrawals from a Roth IRA tax-free?
Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could make sense for a charitable IRA rollover.
Can other retirement plans, such as 401(k) and 403(b) accounts, be used?
No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.
Can a gift be made to any charity?
No. Excluded are:
-Donor advised funds
Who can benefit from using the charitable IRA rollover to make a gift?
Those with significant assets in an IRA
Those who do not itemize deductions for income ta purposes
Those who earn enough to have part of their deductions phased out. (In 2015, that phase-out begins at $309,900 for married filing jointly, and at $258,250 for single filers.)
Is the charitable IRA rollover right for me?
While this is an excellent option, other types of gifts may provide a donor with more tax benefits. As with any gift planning question, you should consult tax professionals for advice.
Can I still make a gift with an IRA beneficiary designation?
Of course! Whether or not you choose to make a charitable IRA rollover gift, you can designate The New York Community Trust (Community Funds Inc.) as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.
Contact us. (631) 991-8800
David M. Okorn, ext. 226
Marie C. Smith, ext. 223