What are the potential benefits of charitable IRA rollovers?
IRA withdrawals made directly to charity that meet all the requirements (below) are excluded from the tax-payers adjusted gross income, thus avoiding the income tax that would otherwise be owed on the IRA withdrawal. In effect, the withdrawal is a tax free “rollover” rather than a charitable deduction. Such treatment means that taxpayers who don’t itemize deductions (a vast majority of taxpayers under provisions of the new 2018 Federal tax law) can still receive a tax benefit from their generosity. In addition, since these withdrawals reduce adjusted gross income, they may help donors:
- avoid or reduce income taxes on Social Security benefits
- avoid higher Medicare premiums
- avoid surtaxes on net investment income
Plus, to top it off, Charitable IRA Rollovers count toward the account owner’s IRA required minimum distribution (RMD) for the year.
That’s a lot of potential tax benefits! You can probably tell from this rather extensive list that spending time with your tax advisor should be a priority in order to determine the extent of these benefits for you personally, and in order to coordinate your RMD with any Charitable IRA Rollovers you might choose to do.
What are the requirements for a Charitable IRA Rollover?
There are a number of very specific rules that must be met in order to have a qualifying Charitable IRA Rollover. The major ones are as follows:
- The donor must be age 70½ or older on the date of the gift.
- Total rollover gifts may not exceed $100,000 per IRA holder per calendar year.
- Gifts must be made from IRA accounts only. Gifts from other retirement plans such as 403(b)s, 401(k)s, or Keoghs are not eligible.
- Gifts must go to a public charity (such as Kansas Foundation for Agriculture in the Classroom). Gifts to donor advised funds or private foundations are not permitted.
- Distributions must go directly from the IRA provider to the charity. The donor cannot take possession of the funds.
- The gifts must be outright. Rollovers to charitable gift annuities or charitable remainder trusts don’t qualify.
Again, consultation with your tax advisor regarding these rules is recommended.
Making a Charitable IRA Rollover gift to Kansas Foundation for Agriculture in the Classroom
If you decide that you would like to take advantage of this unique giving provision to make a gift to Kansas Foundation for Agriculture in the Classroom, first contact your IRA provider and inform them that you wish to make a Charitable IRA Rollover (technically referred to as a “Qualified Charitable Distribution”) from your IRA account. Ask them to issue a check in whatever amount you decide, made payable to Kansas Foundation for Agriculture in the Classroom to be sent to 1990 Kimball Avenue, Manhattan, KS 66502.
It is also recommended that you next contact the KFAC office at the address above or by phone at (785)320-4350. We will need you to inform us of your upcoming Charitable IRA Rollover gift and provide us with a few pertinent details, such as the amount of the gift, name of the IRA provider and the IRA account number from which the gift is coming. This is so we can easily match you up with your gift, which is coming directly from your IRA provider, since sometimes checks from IRA providers don’t clearly indicate the donor.