IRA Charitable Rollover
The Pension Protection Act of 2006 created the IRA Charitable Rollover, allowing owners aged 70½ or older of traditional and Roth IRAs the ability to distribute directly, or "rollover," to certain public charities (including Clarkson) up to $100,000 per year without the distribution being included as taxable income, but allowing it to count towards the annual mandatory withdrawal.
The Protecting Americans From Tax Hikes Act of 2015 (PATH) extended and made permanent the IRA Charitable Rollover.
IRA Charitable Rollover Qualifications
Based on the Pension Protection Act of 2006:
- The IRA owner must be at least 70½ years old at the time a transfer is made to charity
- The transfer must be made from the IRA directly to a qualified charity
- The combined value of all transfers made (to one or more charities) cannot exceed $100,000 per taxpayer per taxable year
- A qualified charity is an organization described in section 170(b)(1)(A), other than organizations described in section 509(a)(3)
- Transfers are not included in adjusted gross income for federal income tax purposes
- Transfers to charity may count as part of your annual mandatory IRA withdrawal amount
- IRA transfers to charity are not taken into account in determining the deduction eligibility of other charitable contributions
The IRS issued these clarifications in 2007:
- Rollover distributions can satisfy pledges
- A person over age 70½ who is the beneficiary of an inherited IRA may make charitable transfers from that IRA
- Charitable transfers may be made from a SEP or a SIMPLE IRA if no employer contributions were made to the IRA in the year of the transfer
- A qualified charitable distribution is not subject to withholding of income taxes
- The maximum total qualified charitable distribution amount each year is $100,000 per person, not per household, or per IRA account.
- The IRA administrator may issue a check payable to the charity and present it to the donor to deliver to the charity. The gift date is the date the donor mails the check via the USPS or hand-delivers it to the charity
Transfers cannot be made from 401(k) plans, but it appears allowable under certain circumstances to move a portion of the 401(k) into a Rollover IRA and then make a qualified charitable distribution from there
- The transfer must be made from your IRA directly to charity, otherwise you must declare the distribution as income
- The IRA must be a traditional IRA or a Roth IRA; it cannot be an employer sponsored plan such as a SIMPLE IRA, a 401(k) or 403(b) plan or a simplified employment pension (SEP) plan
- Distributions from Roth IRAs are not taxed to the account owner, so it is still wise to determine if some asset other than the Roth IRA is best to give to charity
- Transfers are not deductible as charitable gifts
- You may receive no benefit from the charity for your transfer (e.g. tickets, dinners, etc.)
- Transfers cannot be made to gift annuities, charitable trusts or pooled life income funds
- Transfers cannot be made to donor advised funds, private foundations or “supporting organizations”
- The donor is responsible for and must obtain documentation for the transfer as he/she would substantiate any gift to charity
- Transfers are made from otherwise taxable income first. Non-taxable income in your IRA may not be considered a qualified transfer and should be handled differently
- In some states (check with your advisor), IRA rollovers may be includable in income for state and local tax purposes and may not earn an offsetting charitable deduction, depending on state and local law
- In some states (check with your advisor), IRA withdrawals up to a certain amount may not be includable for state income tax purposes, thus negating some benefit of an IRA charitable rollover at the state level.
Who might use this opportunity?
If the majority of your assets are in IRAs, it may be easier to make a direct transfer rather than reporting a withdrawal on your tax return
- If you do not itemize, you may be able to make IRA gifts without increasing (and maybe even decrease) your adjusted gross income
- If you already give up to 50% of your adjusted gross income, this legislation may allow you to, in effect, exceed that limit
- If you have accrued a “carryover” of charitable deductions from past tax years, this legislation may allow you to make gifts without impacting those carryover amounts
- If your level of income phases-out certain deductions, a rollover may allow you to make gifts without increasing (and maybe even decrease) your adjusted gross income
- It may simply be easier to make a transfer from your IRA to charity and not need to worry about the income tax implications
- If you’ve been thinking about making a larger gift, this may provide a tax-advantaged time-frame for doing it
- In some states (check with your advisor) a charitable deduction is not allowed for state tax purposes. A rollover that does not increase your reportable income may result in savings on state taxes as well
IRA Rollover gifts are eligible to count in Clarkson fundraising campaigns, in your next anniversary reunion and towards annual Roundtable recognition.
Everyone’s financial position is unique, so it is important to consult your tax counsel and plan administrator before making gifts from your IRA.
Making a gift to Clarkson
IRA charitable rollovers must be requested by the donor directly from his/her IRA administrator. The process is not standardized across the industry, and each company will set its own policies and procedures, so you may wish to contact your administrator early in the process. The proper name to use in a transfer request is “Clarkson University,” and the federal ID number is 15-0543659. You may wish to provide this mailing address
Annie Clarkson Society
Box 5522, Woodstock Lodge
Potsdam, NY 13699
Click for a sample letter to your IRA administrator to request a transfer.
Click for a sample letter to notify Clarkson about your IRA charitable rollover request.
Click to contact the Annie Clarkson Society for help with questions.
Follow us on Twitter @annieclarkson
This web page does not provide legal or financial advice, nor is it a comprehensive review of the topic. You should consult your legal and financial advisors and Clarkson University before making or planning your gift. (rev. 2/2016)