Achieve tax benefits from making IRA distributions to charity
The PATH Act passed December 18, 2015 allows donors age 70 ½ and older to transfer up to $100,000 from their Individual Retirement Accounts (IRAs) to a qualified public charity free of federal income tax. The gift qualifies for the donor's required minimum distribution (RMD).
How does the IRA recipient benefit from making this type of donation?
Each year, IRA owners age 70½ and older must take a required minimum distribution (RMD). The distributions generally commence at age 71 and must be taken by the IRA owner no later than December 31 of each year. The Charitable IRA Rollover is limited to no more than $100,000 ($200,000 for married couples with separate IRA accounts), but it does qualify as a RMD. Normally, the RMD is treated as income to the IRA owner. When given directly to charity under this law, the rollover amount is not counted towards the IRA owner’s income for federal tax purposes. In some instances, it is not counted for state income tax purposes. Therefore, if the IRA owner must take the distribution but does not need the income, giving it to charity reduces the IRA owner’s overall income tax burden and allows him/her to support a favorite charity.
Can donors do a Charitable IRA Rollover into a donor advised fund and get the tax benefit?
While Parasol is a qualified public charity, a donor advised fund is not eligible to receive a gift from a Charitable IRA Rollover. There are several other fund options available if a donor wishes to make a gift to Parasol using an IRA rollover. We are available to assist in choosing a fund that fulfills your charitable goals.
Parasol is especially suited to help you make the tax-free gift of your IRA distribution.
•Personalized Service – We can make your charitable transfer easy, flexible and effective, helping you achieve your personal, charitable and financial goals. We are happy to answer your questions and complete all required paperwork; or, if you prefer, we can consult with your financial advisor or estate planner to come up with the solutions that’s right for you and your family.
•Local Expertise – Our staff continually monitors all areas of community need, including social services, education, environment, healthcare and the arts. We understand the capabilities of local nonprofits addressing these needs. When you give to Parasol, you know your gift will be put to good use.
Who should donors contact about making a gift from an IRA?
After consultation with a legal or tax professional to determine if this type of gift is appropriate for their circumstances, IRA owners wishing to make rollover contributions must go through the IRA custodian who is administering their IRAs. Most IRA custodians have forms on the company website that will permit the distribution to be made to the charity.
Parasol Tahoe Community Foundation is providing this information for educational purposes only, and it is not intended to be treated as legal or tax advice. As when making any donation, the donor should consult with a legal or tax professional prior to making the contribution.