How an IRA Charitable Rollover gift can reduce taxes

Are you 70 ½ or older and looking to make a lasting impact on Tidewater’s Jewish community? If you have an Individual Retirement Account (IRA), making an IRA Charitable Rollover with the Tidewater Jewish Foundation might be worth considering. By tapping into this asset, individuals will be able to make a larger philanthropic impact than previously possible and enjoy significant tax advantages.

An IRA Charitable Rollover, also known as a Qualified Charitable Distribution (QCD), is a withdrawal from an individual retirement account that is sent directly to a qualified public charity. A primary benefit of this option is that it keeps those funds out of the donor’s adjusted gross income (AGI). Required minimum distributions (RMDs) must be taken from the IRA and will add to a donor’s AGI by April 1 of the year following the year in which they turn 72 (70 ½ if they reached 70 ½ before January 1, 2020) regardless of whether they are still employed.

“While a Charitable IRA Rollover may not be directed to a donor-advised fund, there are several ways to give through the Charitable IRA Rollover to leave a legacy gift, such as to direct dollars to a specific nonprofit organization, unrestricted funds, field of interest funds or other designated funds,” said Naomi Limor Sedek, President and CEO of the Tidewater Jewish Foundation. “Our Foundation professionals will happily work with you to structure your Charitable IRA Rollover to achieve your desired impact.”

Historically, donors who give large amounts to an organization would itemize their deductions. Under the tax law, many are often better off using the much larger standard deduction. However, by not itemizing, they get no tax benefit from their philanthropic gifts. This is often where an IRA Charitable Rollover can be advantageous.

With this option, the donor receives the tax benefit from the gift, only now it comes in the form of an IRA withdrawal (rather than an itemized deduction) and the ability to exclude that income on their tax return. In addition, the much larger standard deduction will still apply.

Basic facts about IRA Charitable Rollovers

  • Donor must be 70 ½ years old.
  • Donors can transfer up to $100,000 a year from an IRA, which will not be taxed as income. Limit is per person, no per IRA.
  • Gifts must be made directly from the IRA to the organization. If not, the tax benefits will not be received.
  • IRA Charitable Distributions cannot go into a DAF (donor advised fund) but may go into an endowment or permanent fund for the benefit of one or more agencies.

When the time comes to consider how your assets can be best used, consider contacting the Tidewater Jewish Foundation so it’s possible to make the greatest impact possible with a gift that makes sense for each donor, family, and community.

For more information, contact Naomi Limor Sedek, President and CEO, at nsedek@ujft.org or 757-96-6109.

This information is not intended as tax, legal, or financial advice. Gift results may vary. Consult your personal financial advisor for information specific to your situation.