Qualified Charitable Distribution (IRA Charitable Rollover)

Qualified Charitable Distribution (IRA Charitable Rollover)

Use Your Traditional IRA to Make a "Tax-Free" Gift to Webb Institute.

Tools you will need

What is the procedure to execute an IRA Charitable Rollover? It is simple!

The Qualified Charitable Distribution (QCD) is an excellent way to show your support for Webb Institute and receive tax benefits in return. As you plan your required minimum distributions (RMD), consider using your IRA account to make the most of your charitable giving. You receive a tax benefit even if you take the standard deduction!

It's important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to share this gift plan with your financial advisor.

To qualify

  • You must be 70½ or older at the time of gift.
  • Distributions must be made directly from a traditional IRA account by your IRA administrator to Webb Institute.
  • Gifts must be outright, meaning they go directly to Webb Institute. Distributions to donor-advised funds do not qualify.
  • Gifts from 401(k), 403(b), "ongoing" SEP or SIMPLE IRAs, and other plans do not qualify. Ask your financial advisor if it would make sense for you to create a traditional IRA account so you can benefit from an IRA Qualified Charitable Distribution.

Tax Benefits

  • IRA Qualified Charitable Distributions are excluded as gross income for federal income tax purposes on your IRS Form 1040.
  • The gift counts toward your required minimum distribution for the year in which you made the gift.
  • You could avoid a higher tax bracket that might otherwise result from adding an RMD to your income.

Example

John is 73 and wants to contribute $20,000 to Webb Institute. He has somewhat over $500,000 in his IRA, and his minimum required distribution would be about $20,000. He can authorize the administrator of his IRA to transfer $20,000 directly to Webb Institute in a "qualified charitable distribution" or QCD. John will not be eligible for a charitable income tax deduction, but because the entire amount of the QCD is excluded from income, he still receives tax savings. The $20,000 distributed to Webb Institute will be counted toward his annual required minimum distribution (RMD), and he will not pay income tax on the portion given to charity.

Note: 73 is the age when required to take out the RMD. The earliest age John can withdraw voluntarily from his retirement is 59.5. And the earliest he can make a QCD is 70.5. These numbers can get confusing because if John is between 70.5 and 73, he can still make a QCD but will not enjoy the tax advantage if he is not taking out a distribution.

Questions and Answers

What's the IRS Rule?Layer Closed

The QCD allows individuals 70 ½ and older to make direct distributions up to $105,000 per year to 501(c)(3) charities without having to count the distributions as income for federal income tax purposes. No charitable deduction may be taken, but if you are 73 or older, distributions will qualify for all or part of the IRA owner's required minimum distributions.

Who qualifies?Layer Closed

Individuals 70 ½ or older at the time of the contribution (you have to wait until 6 months after your 70th birthday to make the transfer).

How much can I distribute?Layer Closed

Up to $105,000 per year. The distribution must be outright to charity.

From what accounts can I make transfers?Layer Closed

Distributions must come from your IRAs directly to Webb Institute. If you wish to help us with a gift from another retirement asset such as a 401k, 403b, etc., you must first roll those funds into an IRA. Then you can direct the IRA administrator to distribute the funds from the IRA directly to Webb Institute.

How will Webb Institute count the gift?Layer Closed

We will give you full credit for the entire gift amount. You will also receive a letter, which states that the gift qualifies as a QCD to use for tax reporting purposes.

What are the tax implications to me?Layer Closed

  • Federal - You do not recognize the distribution to Webb Institute as income, provided it goes directly from the IRA administrator to us. Therefore, you are not entitled to an income tax charitable deduction for your gift.
  • State - Each state has different laws, so you will need to consult with your own advisors. Some states have a state income tax and will include this distribution as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their income tax on the federal income or federal tax paid. Some states have no income tax at all.

Can my spouse also make a Qualified Charitable Distribution?Layer Closed

Yes, every individual who is the owner of a traditional IRA can use the Qualified Charitable Distribution for up to $105,000 each year.

How do I know if a Qualified Charitable Distribution is right for me?Layer Closed

Share this information with your financial advisor. Our office can provide additional information and examples of this gift plan. Call us. We would be delighted to help.

What is the procedure to execute a QCD?Layer Closed

We offer a sample letter you can send to your plan provider to initiate the distribution. Please let your plan administrator know this gift must be sent prior to December 31 to qualify as a charitable distribution for the tax year. Make sure you contact us by phone at (516) 759-2040 x105 when you direct the distribution so we can look for the check from your IRA administrator.

For more information, please contact us by phone at (516) 759-2040 x105.

Important Notes:

If your administrator provides you an IRA checkbook, please note that the date of your QCD is NOT the date you send the distribution check, but the date that your IRA administrator transfers the funds to the charity. If you want your distribution check to be credited toward the current tax year, it is critical that you mail your check several weeks before the end of the year to ensure there is time for the check to be received by common reporting standards (CRS) and to clear your account. This is especially true if you are relying on those gifts to fulfill your required minimum distribution.

Documentation

Tax ID:
11-1630912

There are several ways to send a gift from a qualified retirement account to Webb Institute. Once you've decided how you want the check sent to us, follow the appropriate procedure below.

If you are requesting that your IRA administrator send a check directly to Webb Institute:

  • Notify your plan administrator, preferably in writing, that the documentation accompanying the check must include your name and address. You can use our sample letter to make your request.

If you have check-writing capability on your IRA account:

  • If your name and address are not printed on your check, include that information along with your check.

If your IRA administrator is sending the check directly to you, the check must be payable to Webb Institute:

  • Make a copy of the check for yourself. Send the original check, and include your name and address, to Webb Institute.

An important note: No matter how your check is sent to Webb Institute, we need your name and address to accompany the check in order to correctly credit and acknowledge your gift.

Questions? Please contact us by phone at (516) 759-2040 x105. We are here to help.

Be sure to check with your financial advisor to determine whether this gift plan is right for you. This information is not meant as tax or legal advice.