The Amazing Charitable IRA Rollover Gift

By Robert on March 23, 2018 in Announcement, Uncategorized,

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If you are at least 701/2 years old, you can make a direct charitable gift to Richmond Jewish Foundation of up to $100,000 in a single year from your IRA account without having to pay federal tax on the withdrawal.

Your donation can fund your legacy or create an endowment to support the charities of your choice. This permanent tax provision was preserved in the Tax Cuts and Jobs Acts of 2017. Plus, such a gift will qualify for your “required minimum distribution” and you can repeat this gift of up to $100,000 every year.

Consider this example: Ms. Donor is widowed and 77 years old. She must take her required distribution from her IRA before December 31. In her case, she must withdraw close to 4 percent of the total value of her $1.2 million IRA, or more than $45,000. In the process, she must pay ordinary income tax on the amount.

Instead of making the withdrawal, she makes a distribution of $45,000 to Richmond Jewish Foundation through her IRA administrator. This amount is “rolled over” and is not subject to federal income tax and it satisfies her mandatory distribution.

Because the money goes directly to the endowment fund she created, there is no income tax charitable deduction. Had Ms. Donor taken the distribution directly instead and then given it to RJF, she could have claimed a charitable deduction, but the distribution would have been taxed. If she can use the entire deduction, it will offset the taxable distribution and the net effect will be the same as a direct rollover from her IRA to RJF. However, if she does not itemize, she may be worse off financially from the tax consequences.

Another option for Ms. Donor, if she feels that her IRA income will not be needed for the foreseeable future, is to use the maximum annual benefit of the Charitable IRA Rollover and transfer $100,000. This effectively advances more than two years of this type of gift and reduces the size of her IRA without paying federal tax.

This substantial gift will fund an endowment immediately allowing grants to be made annually to the charities designated in the endowment fund.

To learn more about IRA Rollover Gifts, please click here, contact your IRA administrator or reach out to RJF at (804) 545-8656.