Make a Gift from your IRA
As you plan your minimum required distributions for this year, if you do not need the money the government is requiring you to take out, consider using it as a charitable gift.
Individuals ages 70½ and over can make charitable gifts directly from a traditional IRA account without incurring federal income tax on the withdrawal. The IRA Charitable Rollover provides you with an excellent opportunity to make gifts during your lifetime from an asset that might be subject to multiple levels of taxation if it remained in your taxable estate.
- You must be age 70½ or older at the time of the gift.
- Transfers must be made directly from a traditional IRA account by your IRA administrator. Funds that are withdrawn by you and then contributed do NOT qualify. Gifts from 401k, 403b, SEP and other plans do not qualify.
- Gifts must be outright. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities are not allowed.
Qualified charitable distributions:
- Can total up to $100,000
- Are not included in your gross income as reported on IRS Form 1040
- Don’t give you a charitable deduction since the tax break comes from donating the funds instead of withdrawing them
Suppose Mariam wants to contribute $20,000. She has $500,000 in an IRA. Because of her age and the age of her spouse, she has to take a minimum required distribution of $25,000. She doesn’t need that much cash and hates the idea of paying tax on it. Rather than withdraw the $25,000 and pay taxes on the full amount, she can authorize the administrator of her IRA to transfer $20,000 to Goodwill of the Finger Lakes (or any of its community programs) and $5,000 to herself. The $20,000 will count toward her minimum distribution, but will not be subject to federal tax.
Here are the steps to take to make a gift from your IRA:
- Contact your IRA administrator and instruct that person to transfer funds to the charity(ies) you designate.
- IRA administrators don’t always include the donors’ names on distribution checks. Please let us know in advance so we’ll be able to identify your gift. Also, let us know if you want your gift used for a particular purpose.