IRA Charitable Rollover

More Than You Thought Possible

As you plan your required minimum distributions for this year, if you do not need the money the government requires you to take and you would like to make a gift to Bryn Mawr, consider making a qualified charitable distribution using the IRA Charitable Rollover.

What You Need to Know

  • You must be 70½ or older to make a qualified charitable distribution from your traditional IRA.
  • You may distribute any amount up to $100,000 in a calendar year to charity without paying taxes on the withdrawal.
  • The gift must be in the form of an outright gift.
  • The qualified charitable distribution must be made directly from a traditional IRA account by your IRA administrator to Bryn Mawr College.

Example

Mary '67 wants to make a gift for her 50th Reunion to Bryn Mawr College. She has $530,000 in her IRA. Her required minimum distribution is $19,343.07 and she wants her gift to the College to be $15,000.  She authorizes the administrator of her IRA to transfer $15,000 as a qualified charitable distribution to Bryn Mawr College and the remaining portion of her required minimum distribution, $4,343.07, to herself.  The $15,000 distributed to Bryn Mawr College will not be subject to federal income tax and will count toward her annual minimum required distribution. Mary is delighted that her gift to the Bryn Mawr Fund will fund a Merion Scholarship for a talented Bryn Mawr student.

Benefits

While you do not receive a charitable tax deduction for this gift, the qualified charitable distribution is not subject to income taxes. This may be appealing if:

  • You have already contributed as much as you currently can deduct (as limited by your adjusted gross income). The charitable distribution allows you to maximize your charitable contribution while minimizing your adjusted gross income.
  • You do not itemize your taxes. Since the qualified charitable deduction counts towards your required minimum distribution and is not subject to tax, your benefit is broadly equivalent to an income-tax deduction.
  • You currently reside in a state that does not allow itemized charitable deductions.

FAQs

I don’t have an IRA. Can I make a gift directly from my employer-sponsored retirement plan?

Only distributions from an individual IRA (including a rollover IRA) are eligible. If you have an employer-sponsored retirement plan, for example a 401 (k) or 403 (b), consult your financial advisor about creating a new IRA from these plan assets to make your charitable gifts.

Why would I want to take advantage of this opportunity if I can’t deduct my gift?

Many of our IRA donors view this opportunity as a way to manage their income. Making an IRA charitable distribution may reduce your provisional income, which may in turn reduce the tax you pay on Social Security benefits. There are other potential tax and financial benefits from reducing your income including lower Medicare premiums, reducing the likelihood of being subject to the 3.8% tax on net investment income, and reducing the amount of your “phaseout” for other deductions and credits. Each individual’s situation is different, and we suggest you consult your financial advisor to discuss the best way for you to make your gifts.

I’d like to use a charitable distribution from my IRA to create a gift annuity. Is this possible?

This is not possible currently (as of October 2016). However, legislation is under consideration that would permit a qualified charitable distribution to fund or contribute to certain gift types and vehicles, including charitable remainder trusts, charitable gift annuities, donor-advised funds, and foundations. Contact us if you would like to know when legislation is enacted so that you can fund other types of gifts through your IRA distribution.

What type of accounts can be used to make this gift?

The account types that are eligible for QCDs include:

  • Traditional IRAs
  • Inherited IRAs
  • SEP IRA (inactive plans only*)
  • SIMPLE IRA (inactive plans only*)

* Per the IRS, a SEP or SIMPLE IRA is considered ongoing if it has been maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner’s taxable year in which charitable contribution would be made.