How an IRA Charitable Rollover Works

December 20, 2022

An IRA charitable rollover, also known as a qualified charitable distribution, is a way for you make a donation directly from an Individual Retirement Account (IRA) to an eligible charitable organization. Because the money is paid directly from the IRA to the charity, the amount is excluded from your taxable income.

How it works

Executing an IRA charitable rollover is relatively simple. The donor contacts their IRA plan administrator to transfer funds to a charitable organization (the legal name and federal tax ID number of the organization will be required. Then, the administrator transfers funds directly to the charity and the amount is excluded from the donor’s adjusted gross income when tax season comes.

However, there are a few rules and limitations:

  • Donors must be at least 70.5 years of age
  • The total amount of IRA rollovers for the tax year cannot exceed $100,000. Amounts more than $100,000 will be counted as taxable income.
  • Rollovers can only be made from IRAs. Distributions from other types of retirement assets like 403(b) plans, 401(k) plans, pension plans, etc. do not qualify as charitable rollovers.
  • IRA charitable rollovers cannot be used for donor advised funds, supporting organizations, or private foundations

Benefits of an IRA charitable rollover

Since an IRA rollover does not count as income, it can reduce your annual income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.

Additionally, starting at age 72, IRA account holders are subject to required minimum distribution (RMD) rules. A RMD is a specific amount that U.S. tax law requires you to withdraw annually from the IRA. However, IRA charitable rollovers count toward the RMD. This makes rollovers an attractive option for donors who don’t need the extra taxable income from their RMDs.

Finally, IRA charitable rollovers are an easy way to make a substantial gift to your favorite charity in your lifetime – allowing you to see the difference your donation is making. To find out more about IRA charitable rollovers and how they may uniquely affect your tax position and planned giving strategy, speak with your financial adviser.

If you’re interested in an IRA charitable rollover, consider giving to Miami Jewish Health so that we can continue our mission of providing innovative health services and lifestyle programs for aging adults. Please contact Alison Grewe at agrewe@miamijewishhealth.org or 305-762-3842, and we can work with you to designate your gift according to your wishes.

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