For those age 70½ or older who want to make a lasting impact on Tidewater’s Jewish community, an Individual Retirement Account (IRA) Charitable Rollover might be worth considering. This special giving option helps tap into an asset that may not be needed all or part of and offers significant tax advantages. The result is an easy, tax-savvy gift that has the potential to help individuals make a larger philanthropic impact than previously thought possible.
An IRA Charitable Rollover (also known as a Qualified Charitable Distribution or 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). Many things are tied to AGI, including taxation of social security benefits and Medicare premiums.
This giving option has been available since 2006, but recent changes in how deductions function on federal tax returns have made it even more beneficial, making it a hot topic for financial advisors and donors looking to maximize their philanthropic impact in a tax-wise manner.
Historically, donors who give large amounts to an organization would itemize their deductions. Under the new tax law, many are often better off using the new and 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 makes the most sense.
With this option, the donor still receives the tax benefit from the gift, despite the changes in tax code, 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, that new and much larger standard deduction still applies.
Thanks to the IRA Charitable Rollover, the AGI and ultimately, the tax liability, may all end up lower than they would be otherwise.
Tidewater Jewish Foundation is well versed in handling IRA Charitable Rollovers. Scott Kaplan, TJF CEO, says that not enough people are aware of this giving option and its many benefits.
“With recent changes in the tax law, IRA Charitable Rollovers have emerged as one of the smartest ways to make a philanthropic impact. However, this is new information for a lot of people so we are doing our best to make sure our Jewish community knows this option is available. I expect to see an increase in its utilization as more people become aware of it,” says Kaplan.
Basic facts about IRA Charitable Rollovers
- Donor must be 70 ½ to take advantage of this giving option.
- Donor can transfer up to $100,000 a year from an IRA and none of that money will be taxed as income. Also of note, that limit is per person and not per IRA. When considering ways to build a philanthropic legacy, this is a smart option.
- Gifts must be made directly from the IRA to the organization. If it passes through the donor’s hands, the tax benefits will not be received.
- IRA Charitable Distributions cannot go into a donor advised fund, but may go into an endowment or permanent fund for the benefit of one or more agencies.
- The Tidewater Jewish Foundation is a free resource that can help guide donors through this process and, if needed, can connect them with a trusted financial or legal advisor.
An IRA is built through decades of hard work and investment. That asset represents professional successes, failures, lessons learned, ladders climbed, and glass ceilings shattered. When the time comes to consider how those funds will best be used, consider contacting Tidewater Jewish Foundation so it is possible to make the greatest impact possible with a gift that makes sense for each donor, family, and community.
Contact Kaitlyn Oelsner, development associate and LIFE & LEGACY coordinator at 757-965-6103.
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.
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