Did you know required distributions from your individual retirement account (IRA) could be used to achieve your philanthropic goals — and potentially help you avoid income tax? Even if you’re still working, if you are 70 ½ years of age (or someone you love is), you are required to take minimum distributions from your IRA, and those distributions are treated as taxable income.
However, in December 2015, Congress permanently passed the IRA Charitable Rollover provision that allows those over age 70½ to transfer up to $100,000 per year from their IRA accounts directly to charities like Pi Beta Phi Foundation without having to recognize the distribution as income.
This is a relatively simple process and a great way to support your favorite charities. Here are answers to some questions the Foundation frequently receives about this tool:
What is an IRA Charitable Rollover?
An IRA Charitable Rollover is a provision that gives certain donors the opportunity to exclude transfers of Individual Retirement Account (IRA) assets from their taxable income when transferring gifts directly to public charities.
What are the benefits of using an IRA Charitable Rollover?
Using an IRA Charitable Rollover makes it simple to use your IRA assets to make charitable gifts during your lifetime.
What gifts qualify for an IRA Charitable Rollover?
A qualified charitable contribution would be:
- Made from a donor age 70 ½ or older.
- Transferred directly from an IRA to a public charity, such as Pi Beta Phi Foundation.
- Completed within the applicable tax year.
What are the limitations of this opportunity?
An individual’s charitable gifts made through an IRA rollover cannot exceed $100,000 in one tax year.
How does this affect my required minimum distribution?
A qualifying rollover gift can help satisfy your required minimum distribution for the year if you have not already reached it.
Why might I choose to make a gift through an IRA rollover?
This might be a good option for you, if:
- You have significant assets in an IRA.
- You are making large gifts in relation to your income.
- You have so few deductions that you choose not to itemize.
What tax benefit will donors receive for making this type of gift?
The only benefit a donor receives from making an IRA Charitable Rollover gift is not having to recognize the distribution as income. There is no tax deduction for this type of gift.
Is the charitable IRA rollover right for me?
An IRA Charitable Rollover gift is a great option for donors who qualify; however, there are other tax advantaged charitable planning vehicles that may provide additional benefits. While Pi Beta Phi Foundation staff cannot provide legal or tax advice, we can visit with you about options available to meet your charitable and financial goals.
How do I make an IRA Charitable Rollover to Pi Beta Phi Foundation?
Work with your IRA custodian (often donors use an IRA Custodian Letter) to share your intent to make a charitable rollover gift. Your custodian will work directly with the public charity to distribute your gift. If you are interested in donating to Pi Beta Phi Foundation, please also contact the Foundation directly to share your intent. The Foundation wants to make sure your gift is designated correctly and confirm how you would like to be recognized. Contact the office by telephone at (636) 256-1357 or via email at firstname.lastname@example.org.
Can I use rollover gifts to pay towards my pledge to SHINE THROUGH?
Yes! If you have already made a pledge to SHINE THROUGH, your rollover gift can be used to fulfill your pledge. Please indicate your intent to fulfill your campaign pledge by contacting Pi Beta Phi Foundation at (636) 256-1357. If you have not already made a campaign gift, any rollover gifts before June 30, 2019, will be recognized as part of the campaign. SHINE THROUGH is a comprehensive campaign, meaning any gift made before the campaign concludes in June 2019 will be celebrated.
Can I still make Pi Beta Phi Foundation a beneficiary of my IRA?
Of course! Naming Pi Beta Phi Foundation as a beneficiary of your IRA is a simple way to honor the sisterhood in your estate plans, regardless of your decision to make an IRA Charitable Rollover gift. Creating a deferred gift also will be celebrated in the SHINE THROUGH campaign, and you will become a member of the Foundation’s Marianne Reid Wild Society.
If you have additional questions, please contact the Foundation directly at (636) 256-1357. While Foundation staff cannot provide legal, tax or investment advice, staff can visit with you about options available to meet your charitable and financial goals and help you think about additional questions to ask your advisors.
This blog post is courtesy of Pi Beta Phi Foundation Director of Development Jenny Miller Pratt, Indiana Alpha.