Qualified Charitable Distributions

Mary Ellen Nolan Bruni (NDSJ ’53) and Arnold Bruni

Mary Ellen Nolan Bruni (NDSJ ’53) and Arnold Bruni

Looking for an easy way to reduce your taxable income and support your favorite charity at the same time?  Consider a charitable rollover directly from your IRA.  If you are age 70 ½, you can distribute up to $100,000 out of your IRA directly to charity.  The amount of your gift counts toward your annual required minimum distribution (RMD) and is excluded from your income for federal income tax purposes.

Mary Ellen Nolan Bruni (NDSJ ‘53) used the charitable rollover last year to make a gift to the Sisters.  “It is easy to make this type of gift,” explains Mary Ellen, “because it comes directly out of your regular IRA or rollover account, and goes directly to the charity.” She and her husband Arnold enjoy knowing that their gift will make a significant contribution to the care and support of the retired Sisters. It is Mary Ellen’s way of thanking the Sisters for dedicating their lives to the education of young women.

The article below details the requirements for making an IRA charitable rollover gift. Leigh Howell, Associate Director of Development, would also be happy to answer your questions.  She can be reached at (650) 551-6402 or leigh.howell@sndden.org. 

Qualified Charitable Distributions

(Also referred to as Charitable IRA Rollover Gifts)

Did you know the gift of a Qualified Charitable Distribution (QCD) benefits donors aged 70½ and up?

The Qualified Charitable Distribution is an excellent way to show your support for Sisters of Notre Dame de Namur and receive tax benefits in return. As you plan your required minimum distributions (RMD) for this year, consider using your IRA account to make the most of your charitable giving. You receive a tax benefit even if you take the standard deduction!

It’s important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to share this gift plan with your financial advisor.

To qualify

  • You must be 70½ or older at the time of gift.
  • Distributions must be made directly from a traditional IRA account by your IRA administrator to Sisters of Notre Dame de Namur.
  • Gifts must be outright, meaning they go directly to Sisters of Notre Dame de Namur. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities do not qualify.
  • Gifts from 401k, 403b, SEP and other plans do not qualify. Ask your financial advisor if it would make sense for you to create a traditional IRA account so you can benefit from an IRA Qualified Charitable Distribution.

Tax Benefits

  • IRA Qualified Charitable Distributions are excluded as gross income for federal income tax purposes on your IRS Form 1040.
  • The gift counts toward your required minimum distribution for the year in which you made the gift.
  • You could avoid a higher tax bracket that might otherwise result from adding an RMD to your income.

Example

John is 71 years old and wants to make a gift to Sisters of Notre Dame de Namur. He has $500,000 in his IRA and wants to gift $20,000. He can authorize the administrator of his IRA to distribute $20,000 to Sisters of Notre Dame de Namur. Because the IRA Qualified Charitable Distribution is excluded from income, John will not be eligible for a charitable income tax deduction — but he still receives tax savings. The $20,000 distributed to Sisters of Notre Dame de Namur will be counted toward his annual minimum required distribution and he will not pay income tax on the portion given to the school.

Questions and Answers

What’s the IRS Rule?

The QCD allows individuals 70½ and older to make direct distributions up to $100,000 per year to 501(c)(3) charities without having to count the distributions as income for federal income tax purposes. No charitable deduction may be taken, but distributions will qualify for all or part of the IRA owner’s required minimum distributions.

Who qualifies?

Individuals 70½ or older at the time of the contribution (you have to wait until 6 months after your 70th birthday to make the transfer).

How much can I distribute?

$100,000 per year. The distribution must be outright to charity.

From what accounts can I make transfers?

Distributions must come from your IRAs directly to Sisters of Notre Dame de Namur. If you wish to help us with a gift from another retirement asset such as a 401k, 403b, etc., you must first roll those funds into an IRA. Then you can direct the IRA administrator to distribute the funds from the IRA directly to Sisters of Notre Dame de Namur.

Can I use the QCD to fund life-income gifts (charitable gift annuities, charitable remainder trusts, or pooled income funds), donor advised funds or supporting organizations?

No, these are not eligible.

How will Sisters of Notre Dame de Namur count the gift?

We will give you full credit for the entire gift amount. You will also receive a letter, which states that the gift qualifies as a QCD to use for tax reporting purposes.

What are the tax implications to me?

  • Federal — You do not recognize the distribution to Sisters of Notre Dame de Namur as income, provided it goes directly from the IRA administrator to us. Therefore, you are not entitled to an income tax charitable deduction for your gift.
  • State — Each state has different laws, so you will need to consult with your own advisors. Some states have a state income tax and will include this distribution as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their income tax on the federal income or federal tax paid. Some states have no income tax at all.

Does this transfer qualify as my required minimum distribution?

Yes. Once you reach 70½, you are required to take required minimum distributions from your retirement plans each year according to a federal formula. QCDs count toward your minimum required distribution for the year in which you make the gift.

Can my spouse also make a Qualified Charitable Distribution?

Yes, every individual who is the owner of a traditional IRA can use the Qualified Charitable Distribution for up to $100,000 each year.

How do I know if a Qualified Charitable Distribution is right for me?

Share this information with your financial advisor. Our office can provide additional information and examples of this gift plan. Call us. We would be delighted to help.

What is the procedure to execute a QCD?

We offer a sample letter you can send to your plan provider to initiate the distribution. Please let your plan administrator know this gift must be sent prior to December 31 to qualify as a charitable distribution for the tax year. Make sure you contact us when you direct the distribution so we can look for the check from your IRA administrator.

For more information, please contact us.

Important: Be sure to check with your financial advisor to determine whether this gift plan is right for you. This information is not meant as tax or legal advice.


The material on this website is not offered as legal or tax advice. Please consult with your professional advisors prior to any gift.
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