Charitable Distribution From Your IRA
NEW LAW: No Required Minimum Distributions in 2020!
As a part of the CARES Act, Congress has temporarily eliminated most required minimum distributions (“RMD”) from retirement plans during 2020. Check with your financial advisor to see how this might affect you. Even without an RMD, a QCD remains a great way to make tax advantageous contributions. Learn more about the CARES Act.
More Than You Thought Possible
A Qualified Charitable Distribution (QCD), also known as an IRA Charitable Rollover gift, allows individuals 70 ½ years of age or older to make an outright gift of up to $100,000 from an IRA to Bryn Mawr. It is a tax-efficient way to make a gift and may satisfy all or part of your Required Minimum Distribution (RMD).
Instruct your IRA administrator to transfer the funds directly to Bryn Mawr College. Checks should be mailed to Bryn Mawr College, Alumnae Relations & Development, 101 North Merion Ave, Bryn Mawr, PA 19010.
What You Need to Know
- You must be 70½ or older to make a Qualified Charitable Distribution (QCD) from your 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 (QCD) must be made directly from an IRA account by your IRA administrator to Bryn Mawr College.
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 (QCD) 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.
While you do not receive a charitable tax deduction for this gift, the Qualified Charitable Distribution (QCD) 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.
- If you don’t itemize deductions and are not yet required to take your RMD, a QCD offers all of the benefits of an itemized income tax charitable deduction.
- If you are age 72 or older and must take your RMD, a QCD can satisfy your RMD without increasing your income taxes.
- You currently reside in a state that does not allow itemized charitable deductions.
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 a Qualified Charitable Distribution (QCD) from an IRA 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 (QCD) 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.
How do I make Bryn Mawr College a beneficiary of my IRA?
You request a beneficiary designation form from your plan custodian, insurance agent, or bank branch and designate Bryn Mawr as a beneficiary. You can designate the College as a primary, contingent, or co-beneficiary. Your gift is distributed to Bryn Mawr upon your death.
Click here to learn more about Beneficiary Designations.
This is not intended to be legal or tax advice. We encourage you to consult your own legal or tax advisor.