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Charitable IRA Rollover

The federal government recently extended legislation that makes it more attractive for certain donors to support nonprofits like the University of Richmond with funds from an Individual Retirement Account (IRA). Answers to frequently asked questions about the government's IRA rollover policies are below.

What is a charitable IRA rollover?

This special provision allows certain donors to exclude from taxable income certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including the University of Richmond. The provision was originally enacted for tax years 2006 and is now in effect permanently.

How does this help me?

Under current law, withdrawals from traditional IRAs and certain Roth IRAs are taxed as income, even if they are immediately directed to a charity. The donor receives a tax deduction for his donation, but various other federal, and sometimes state, tax rules can prevent the deduction from fully offsetting this taxable income. As a result, many donors have chosen not to use IRA assets for lifetime gifts. The charitable IRA rollover eliminates this problem permanently.

Why will lifetime IRA gifts be easier?

Under current law, withdrawals from traditional IRAs and certain Roth IRAs are taxed as income, even if they are immediately directed to a charity. The donor receives a tax deduction for his donation, but various other federal, and sometimes state, tax rules can prevent the deduction from fully offsetting this taxable income. As a result, many donors have chosen not to use IRA assets for lifetime gifts. The charitable IRA rollover eliminates this problem permanently.

What gifts qualify for a charitable IRA rollover?

To qualify, a gift must be:

  • Made by a donor age 70 1/2 or older
  • Transferred from a traditional or Roth IRA directly to a permissible public charity, such as the University of Richmond
  • Completed in calendar year 2017 for the 2017 tax year

Is there a limit on the amount that can be given?

Yes, there is a limit. Gifts cannot exceed $100,000 per taxpayer per tax year. However, each individual can give $100,000 between Jan. 1, 2017, and Dec. 31, 2017, for the 2017 tax year.

Is an income tax deduction also available?

No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.

Why are Roth IRAs included? Aren’t withdrawals from a Roth IRA tax-free?

Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a charitable IRA rollover.

Can other retirement plans, such as 401(k) and 403(b) accounts, be used?

No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.

Who can benefit from the charitable IRA rollover?

  • Persons with significant assets in an IRA
  • Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
  • Persons with incomes large enough to be subject to the "itemized deduction" phaseout
  • Persons having so few deductions that they choose not to itemize

What about the required minimum distribution?

If you have not already taken your required minimum distribution, a qualifying rollover gift can count toward satisfying this requirement.

What if a withdrawal does not meet the requirements of a charitable IRA rollover?

It simply will be included in taxable income as other IRA withdrawals currently are.

What about benefits?

No, gifts made through an IRA qualified charitable distribution are not eligible for benefits such as Spider
Points, preferential seating, or the right to purchase tickets or parking passes. Additionally, IRA qualified
charitable distributions are not eligible to be used to establish charitable gift annuities, charitable trusts or
other like income arrangements.

Is the charitable IRA rollover right for everyone?

While this is a great option, other types of gifts may provide donors with more tax benefits. As with any gift planning question, donors should consult their tax professionals for specific advice.

Can I still make an IRA beneficiary designation?

Absolutely! Whether or not you choose to make a charitable IRA rollover gift, you can still designate the University of Richmond as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.

What about 2017 and beyond?

This special tax advantage has now been made permanent!

More questions?

For information on using the IRA Rollover to create a scholarship, fellowship, or ask about other endowed funds contact University of Richmond's Office of Gift Planning by phone at 804-289-8358 or e-mail amcclung@richmond.edu.

Contact Us

Please call (804) 289-8358 or respond via e-mail to giftplanning@richmond.edu to request an illustration that may fit your specific needs.