Qualified Charitable Distribution (IRA Charitable Rollover)
Use Your Traditional IRA to Make a “Tax-Free” Gift to the Moms for Liberty Foundation.
Tools You Will Need
How do you complete an IRA Charitable Rollover? The process is simple!
A Qualified Charitable Distribution (QCD) is a fantastic way to support the Moms for Liberty Foundation while enjoying tax benefits. When planning your required minimum distributions (RMD), consider using your IRA to maximize your charitable impact. This approach provides a tax benefit even if you claim the standard deduction!
Before deciding to make a charitable contribution from your IRA, it’s essential to consider your tax situation. Be sure to discuss this giving strategy with your financial advisor. This information is not meant as tax or legal advice.
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 the Moms For Liberty Foundation
- Gifts must be outright, meaning they go directly to the Moms For Liberty Foundation. 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.
- You could avoid a higher tax bracket that might otherwise result from adding an RMD to your income.
Example
Michael, age 73, wants to donate $20,000 to the Moms for Liberty Foundation With a bit over $500,000 in his IRA, his required minimum distribution (RMD) is about $20,000. He can direct his IRA administrator to transfer $20,000 directly to the Moms for Liberty Foundation in a “qualified charitable distribution” (QCD). While Michael won’t receive a charitable income tax deduction, the full QCD amount is excluded from his taxable income, resulting in tax savings. Additionally, the $20,000 given to the Moms for Liberty foundation will count toward his RMD for the year, allowing him to avoid income tax on the amount contributed to charity.
Note: At age 73, Michael is required to start taking his RMD. The earliest he can make voluntary withdrawals from his retirement account is 59.5, while the minimum age for making a QCD is 70.5. This can be a bit confusing: if Michael is between 70.5 and 73, he can make a QCD, but if he’s not taking an RMD, he won’t benefit from the tax advantage.
Question & Answers
The QCD allows individuals aged 70 ½ and older to directly distribute up to $105,000 annually to 501(c)(3) charities without including it as income for federal tax purposes. Although no charitable deduction applies, for those aged 73 or older, these distributions can count toward all or part of the required minimum distributions (RMDs) from their IRA.
Individuals aged 70 ½ or older at the time of contribution (meaning you must wait until six months after turning 70 to make the transfer).
Up to $105,000 per year, with the distribution made directly to the charity.
Distributions must be sent directly from your IRA to the Moms For Liberty Foundation. If you’d like to make a gift from another retirement account, such as a 401(k) or 403(b), you’ll need to first roll those funds into an IRA. From there, you can instruct the IRA administrator to send the distribution directly to the Moms for Liberty Foundation
No, not currently.
You will receive full credit for the entire gift amount, along with a letter confirming that the gift qualifies as a QCD for your tax reporting purposes.
Federal: You do not recognize the distribution to the Moms for Liberty Foundation 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 its own tax laws, so it’s important to consult your advisors. In some states with income tax, this distribution may be counted as income. Among those, some allow a state income tax charitable deduction, while others do not. Other states calculate state income tax based on federal income or federal tax paid, and some states do not have an income tax at all.
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.
Yes, any individual who owns a traditional IRA can utilize the Qualified Charitable Distribution for up to $105,000 annually.
Share this information with your financial advisor.
A sample letter you can send to your plan provider to start the distribution process. Please remind your plan administrator that the gift must be sent before December 31 to qualify as a charitable distribution for the tax year.