The Charitable IRA Rollover

By Paul Grassmann, JD, FCED

My general philosophy in life is that the simplest way is often the best way. When it comes to charitable giving, considering the new tax laws, this still rings mostly true. For most, complex trusts and private foundations are simply not needed to see major tax savings. My favorite way to give one-time or annual gifts is directly from an IRA using a charitable IRA rollover. While this isn’t always quite as easy as writing a check, most don’t find it much more difficult. In fact, many individuals use this giving technique every year!

Faithful donors to United Church Homes and other organizations sometimes can’t give enough to exceed the new standard deduction ($12,200 for individuals and $24,400 for married couples filing jointly in 2019). Cathy is a great example of a donor who has experienced the benefits of giving through her IRA. Cathy says the process is simple. She calls the adviser who manages her account and instructs them where she wants her portion to go. Then, the adviser sends the check to the charity.

“That’s it. There’s nothing to it!” Cathy said. Through this process, Cathy ensures the entire amount of her donation will go to United Church Homes. “I like that I easily can make the donation and it is free of taxes, so the donation goes further,” she said.

Giving to Your Charity of Choice

By using this giving technique, Cathy can give in a very tax advantaged way. The IRA charitable rollover allows her to exclude the IRA distribution to the charities of her choice from her adjusted gross income (AGI). Thus, she can save income tax on this charitable gift, even if she only claims the standard deduction on her tax return. Additionally, the reduction of her adjusted gross income may reduce the taxation of her Social Security benefits and any deductibility “floors” limiting certain expenses (e.g., 10 percent for medical expenses in 2019) and various other tax items.

While the IRA charitable rollover provides unique tax benefits not found with other types of gifts, there are some requirements and restrictions. You must be age 70 ½ or older at the time of the gift and are limited to $100,000 that you can transfer to qualified public charities each year. Additionally, the gift must come directly from the IRA administrator to the charitable organization. You can’t receive your distribution and then pass it on to the charity. Lastly, the charity cannot have provided you any goods or services in exchange for the IRA charitable rollover.

Complimentary Estate Planning Process

To learn more about giving to United Church Homes from your IRA or to take advantage of a complimentary, values-based estate planning process, please contact Gloria Hurwitz, vice president of advancement and communications, at ghurwitz@uchinc.org or 740.751.8702.