IRA Distributions and Rollovers

Below is some general information about how to gift from your IRA account. Please consult with your financial advisor for advice regarding your specific circumstances, and to determine what’s best for you.

Charitable Rollover

Are you over the age of 70½, have an IRA and want to avoid taxation on your IRA gift? Then a Charitable Rollover may be a great choice for you.

Starting April 1 of the year following the year you reach the age of 70½, you must make mandatory withdrawals from your IRA account(s). This is known as your Required Minimal Distribution (RMB) and, if you keep it for yourself, is counted towards your adjusted gross income (AGI) subject to taxes. But what if you don’t need your RMB this year? Or don’t want to be taxed on it? Then consider gifting it to PAWS and turn it into a qualified charitable distribution (QCD).

In 2006, Congress passed The Pension Protection Act (PPA) permitting individuals over the age of 70½ to “rollover” up to $100,000 from an individual retirement account (IRA) directly to a qualifying charity without recognizing the assets transferred as income. 

These kinds of gifts are known as QCDs and, as stated in the previous sentence, are excluded completely from your taxable income. As such, you can't claim itemized deductions for QCDs, but the tax-free treatment of them equates to a 100% deduction (because you will never be taxed on those amounts) without having to worry about restrictions that apply to itemized charitable write-offs.

So, while you won’t receive a tax deductible receipt, we will still send you a letter acknowledging your gift as an approved IRA charitable rollover to keep for your files.

If you decide to take this route for your contributions, keep in mind these strict law requirements:

  • You must be 70½ or older.
  • The distribution must be one that would have otherwise been taxable.
  • Your QCD must be distributed directly from your IRA to PAWS. It cannot come into your hands at any time. If you do this, you will owe taxes on the whole donation.
  • Only gifts from IRAs and Roth IRAs are eligible; this law does not apply to other retirement accounts such as 401(k)s or 403(b)s. However, you may be able to make a transfer from one of those accounts into an IRA and then make an eligible transfer.
  • Each individual (not household) may give up to $100,000 per year.
  • It must meet the normal tax-law requirements for a 100% deductible charitable donation. If you receive benefits in terms of goods or services, it disqualifies the gift as a QCD.
  • You must report your rollover to the IRS (consult your financial or tax advisor).

And remember, because you will not receive charitable income tax deduction for the IRA charitable rollover, you will receive a gift acknowledgement letter not a tax receipt.

You do not have to itemize your deductions in order to take advantage of this law. It is not subject to the usual limitations on the amount of charitable contributions that are deductible.