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IRA Charitable Rollover is Part of a Smarter Giving Plan

CFNEIA
March 13, 2019

Change is never easy. This phrase holds true for making changes to the way we give to charity as well. But sometimes change is good. For IRA (individual retirement account) owners or beneficiaries who are 70 ½ or older, shifting your giving strategy can provide tax advantages and easily allow you to support the causes you care about. 

Making a qualified charitable distribution (QCD) from an IRA is a tax-effective way to make charitable donations. This strategy, known more commonly as the IRA charitable rollover, allows the owner or beneficiary to make a gift, up to $100,000, directly to the charity of their choice from their IRA. The QCD is different from the required minimum distribution (RMD), which IRA owners must also begin taking yearly at age 70 ½ and is considered taxable income. However, the QCD transfer can count as the RMD for the year. Because the transfer occurs directly from the IRA to a qualified charity, it is not counted as taxable income for federal tax purposes.

The IRA charitable rollover presents an opportunity to rethink the way you are giving and create a plan more beneficial to your financial situation. Using these dollars before they are counted as income can be a smart way to support the nonprofits you have always supported, and potentially increase giving if you want to do more for your community. This is especially beneficial since the Tax Cuts and Jobs Act introduced a new, higher standard deduction in 2018. 

It is important to remember that the QCD (taken as the RMD) must be made directly from the IRA account to the nonprofit. If the RMD is deposited into your bank account and then a check is written to the nonprofit, the gift must still be counted as income. Charitable transfers to nonprofits need to start by contacting the IRA administrator or custodian to initiate the transfer to a nonprofit. 

Community Foundation of Northeast Iowa development staff is here to work with charitable people and their advisors on IRA charitable rollovers and develop a comprehensive philanthropic plan. Community Foundation staff know the nonprofit landscape and community needs across its 20-county region and can assist in finding what fits each individual or family's charitable intent.

IRA charitable gifts can be made to the Community Foundation of Northeast Iowa by establishing an endowed fund that supports a cause or causes forever or by giving to and existing fund, like the over 150 existing nonprofit funds held at CFNEIA. Donor advised funds are not eligible to receive IRA charitable rollover transfers. Utilizing the IRA charitable rollover through CFNEIA may also provide the additional benefit of the Endow Iowa 25% state tax credit. 

Naming a nonprofit, like the Community Foundation, as your IRA’s beneficiary also provides tax advantages. If children are named as your IRA beneficiary, they will pay income tax upon receiving the distribution. Many charitably minded people choose to use their IRA to name a nonprofit they love as the beneficiary. This is a tax-free and impactful way to leave a charitable legacy.

Everyone’s situation is unique, and CFNEIA always recommends discussing important financial decisions, like the IRA charitable rollover, with a professional advisor. 

To start your IRA rollover or to ask any questions, contact Elizabeth Hackbarth at 319-243-1352 or by email

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