An Innovative Idea To Save on Taxes While Supporting APDA – Charitable IRA Rollover

An Innovative Idea To Save on Taxes While Supporting APDA – Charitable IRA Rollover

If you are 70½ or older, consider making a gift to the American Parkinson Disease Association (APDA) with retirement assets while reducing you tax liability. A Charitable IRA rollover is a way to make gifts to APDA and enjoy the tax savings even if you don’t itemize your deductions.

As of December 18, 2015, the IRA Charitable Rollover was passed by Congress and signed into permanent law by the President, allowing taxpayers age 70½ or older to transfer up to $100,000 annually from their IRA accounts directly to charity without first having to recognize the distribution as income.

Regardless of the size of the gift you would like to make, if you qualify, this gift from your IRA (known as a Qualified Charitable Distribution or QCD by tax professionals) is the most tax-efficient lifetime gift of all.

You can make a tax-free gift by directing the administrator of your traditional IRA or Roth IRA to transfer funds directly from your plan to APDA. (You cannot make an IRA charitable rollover gift from other qualified retirement plans, such as 401(k)s, or 403(b)s, or active SIMPLE IRAs or SEP IRAs.) The IRA administrator can transfer the funds directly to APDA or send a check to you that is made out to the American Parkinson Disease Association.

When you make an IRA charitable rollover gift, you won’t need to include the transferred funds in your income for that year and therefore will not pay any tax on them. If you were to withdraw the funds yourself and then make a gift to APDA, you would have to include the withdrawal in your income. Many Americans will no longer itemize post tax-reform and won’t be able to take an offsetting income tax charitable deduction. The net effect of the IRA charitable rollover is to offer the functional equivalent of an income tax charitable deduction even if you don’t itemize.

Another great feature of an IRA charitable rollover gift is that it counts toward the amount you are required to withdraw from your IRA for the year (your required minimum distribution or RMD). If you don’t need these funds for your own use, you can meet your RMD by making gifts to APDA to avoid paying income tax on these withdrawals.

The benefits of making an IRA charitable rollover gift include:

  • Your withdrawal is not included in your income, so it doesn’t affect your taxes.
  • Your withdrawal satisfies the required minimum distribution in the year of the gift.
  • You have the satisfaction of providing immediate support to APDA.

There are several requirements you must meet in order to make an IRA charitable rollover gift to APDA:

  • Your distribution must be from your IRA or Roth IRA.
  • You must instruct your IRA administrator to make a distribution directly to APDA.
  • You must be at least 70½ years old.
  • The total of all your qualified charitable distributions for the year must be no more than $100,000.
  • Your distribution cannot be made to a donor advised fund, private foundation, or supporting organization.
  • You cannot receive any benefit in exchange for your gift.

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This information does not constitute legal or financial advice. Because everyone’s situation is different and the laws of each state vary, you should seek the advice of your own attorney, tax advisor and/or financial planner.

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