IRA Charitable Transfers

Are you over the age of or approaching 70-1/2 and charitably inclined? Do you have a traditional IRA? By working with the Adams County Community Foundation to take advantage of a traditional IRA Qualified Charitable distribution (QCD), you may transfer up to $100,000 to the Foundation and not have it show in your income for tax purposes, resulting in substantial tax savings for you. A married couple with two separate IRAs may take up to $200,000 tax free annually. Please note that the SECURE Act of 2019 pushes back the age to 72 for a Required Minimum Distribution (RMD) but has no impact on an individual’s ability to take a QCD at age 70-1/2.

What is a Qualified Charitable Distribution?

A QCD occurs when someone who is at least age 70-1/2 has his or her IRA make a distribution directly to a public charity. The IRA custodian can transfer the money or property to the charity or the custodian can give the IRA owner a check made payable to the charity, which the owner delivers to the charity.

The amount of the QCD is not included in the gross income of the IRA owner, and the owner doesn’t receive a charitable contribution deduction. But the QCD also counts toward the owner’s required minimum distribution (RMD) for the year. The QCD can be used for all or part of the (RMD) for the year. Each IRA owner is allowed up to $100,000 of QCDs each year.

How it Works

You make a gift from $1,000 up to $100,000 by transferring IRA assets directly to the Adams County community Foundation. If married, each spouse can transfer $1,000 up to $100,000 from their IRA.

Your gift can create a charitable fund in your name, the name of your family or in honor of any person or organization you choose. We’ll handle all of the administrative details.

Your gift will be placed into an endowment that is invested and will grow over time. Grants addressing community needs will be made forever.

Type of Endowments

The Adams County Community Foundation and our partner, the Scioto Foundation, offer eligible individuals several options for QCDs. Transfers may be made to create a Scholarship Fund, which encourages education by providing scholarships to deserving students based upon your suggested academic interest or other criteria. A Field-of-Interest Fund that supports a particular area of interest – such as children, education, animal welfare, health or the environment and relies on the Foundation’s expertise to determine where community need is greatest, is another option. Traditional IRA assets also may be used to create a Community Impact Endowment Fund, which enables the Foundation to help address our community’s changing needs by increasing discretionary grants awards and undertaking new initiatives. And finally, one of the most popular ways for individuals to use IRA assets is to establish a Designated Fund through the Foundation that will make grant awards to your specific charity or charities.

Why would you want to give IRA assets to the Adams County Community Foundation?

Your gift will be put to use today, allowing you to see the difference your donation is making.

You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.

If you are at least 72 years old and have not yet taken your required minimum distribution for the year, your gift can satisfy all or part of that requirement.

Please contact us for additional information about IRA charitable distributions.

We strongly recommend consulting with your attorney, financial advisor or estate planner.

Following are some answers to typical questions about IRA charitable transfers.

What is an IRA charitable Rollover?

The law uses the term “Qualified Charitable Distribution” to describe an IRA charitable rollover (Section 408(d)(8) of the Internal Revenue Code). A Qualified Charitable Distribution is money that individuals who are 70-1/2 or older may direct from their traditional IRA to eligible charitable organizations. Qualified charities include Section 509(a)(1) and Section 170(b)(1)(A) public charities. Section 509(a)(3) supporting organizations and section 4966(d)(2) donor advised funds are not qualified recipients of QCDs.  The provision has a cap of $100,000 for charitable distributions from individual IRAs each year. Individuals may exclude the amount distributed directly to an eligible charity from their gross income.

Will a QCD provide greater tax savings than a cash donation?

Yes. Reducing your Adjusted Gross Income (AGI) generally provides a greater tax benefit than claiming a tax deduction because AGI is used in several calculations, such as determining the taxable portion of your Social Security benefits or what deductions and credits you qualify for receiving. A QCD allows you to receive a tax benefit from your charitable contribution even if you do not itemize your deductions because the QCD is excluded from your taxable income.

Does a donor also receive a charitable deduction when they roll over assets to a charity under this provision?

No. Under this provision, donors benefit by not having to recognize as taxable income the amount contributed directly from their IRA to a qualifying charity. However, because donors exclude this contribution from their gross income, they cannot take a charitable contribution deduction for the contribution, to do so would result in a double benefit for donors that is prohibited.

Is there a QCD option for my 401(k) account or my other retirement assets?

No. The QCD option is only available for charitable rollovers from traditional IRAs. For other retirement accounts, including 401 (k), 403 (B), SEP or SIMPLE plans you could roll over assets into a traditional IRA and thereafter gift the IRA assets with a QCD.

To which charities may donors make qualified charitable distributions?

Most contributions to public charities – other than supporting organizations – are considered qualified charitable contributions. However, distributions from IRA accounts to Donor Advised Funds held by public charities, as mentioned previously, are not considered qualified charitable distributions under this charitable rollover provision.

Will an IRA distribution to a fund held at the Adams County Community Foundation qualify?

Distributions to Unrestricted, Scholarship, Field-of Interest and Designated funds qualify. Distributions to Donor Advised Funds do not.

Can donors contribute IRA assets to a donor advised fund?

Yes, but such distributions do not count as Qualified Distributions from IRAs under these special rules; donors will have to first recognize those distributions as income. They then must calculate their charitable deduction according to the general rules pertaining to percentage limitations and itemized contribution reductions.

Is a donor limited to one IRA charitable distribution per year or can a donor request multiple transfers?

Donors aged 70-1/2 or older are limited to a maximum of $100,000 in any one year as an IRA charitable distribution. However, there is no requirement that the entire amount be made in one transfer or that the entire amount go to a single qualified charitable organization. Donors can request multiple direct transfers from their IRA to qualified charities in a year, but only $100,000 will be excluded from income as an IRA qualified charitable distribution. Any amount in excess of $100,000 from an IRA qualified charitable distribution will be considered as taxable income.

Can a donor make a Qualified Charitable Distribution earlier than age 72?

Yes, even though Required Minimum Distributions are not mandatory until age 72, a donor can transfer up to $100,000 directly from an IRA to the Foundation at age 70-1/2.

How do individuals make a Qualified Charitable Distribution?

Individuals must instruct their IRA trustee to make the contribution directly to the Adams County Community Foundation. In many cases the IRA trustee will send the check to the Donor for delivery to the Foundation.

Should a charity receiving a contribution directly from an IRA provide a gift acknowledgement?

Yes. Individuals making a charitable contribution using IRA funds must obtain a contemporaneous written acknowledgement of the contribution to benefit from this provision. IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements contains information about substantiation of charitable contributions.

TRANSFERRING IRA ASSETS MAY ENABLE YOU TO MAKE A LARGER CHARITABLE GIFT DURING YOUR LIFETIME THAN YOU EVER THOUGHT POSSIBLE, AS WELL AS PROVIDE YOU WITH AN OPPORTUNITY TO EXPERIENCE HOW YOUR GIFT MAKES AN IMPACT!