Qualified Charitable Distribution (IRA Charitable Rollover)
Use Your Traditional IRA to Make a "Tax-Free" Gift to American Heart Association.
Tools you will need
What is the procedure to execute an IRA Charitable Rollover? It is simple!
- Alert Plan Administrator Sample Letter
- Alert American Heart Association Sample Letter
The Qualified Charitable Distribution (QCD) is an excellent way to show your support for American Heart Association and receive tax benefits in return. As you plan your required minimum distributions (RMD), 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 American Heart Association.
- Gifts must be outright, meaning they go directly to American Heart Association. Distributions to donor-advised funds do not qualify.
- Gifts from 401(k), 403(b), "ongoing" SEP or SIMPLE IRAs, 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 73 and wants to contribute $20,000 to American Heart Association. He has somewhat over $500,000 in his IRA, and his minimum required distribution would be about $20,000. He can authorize the administrator of his IRA to transfer $20,000 directly to American Heart Association in a "qualified charitable distribution" or QCD. John will not be eligible for a charitable income tax deduction, but because the entire amount of the QCD is excluded from income, he still receives tax savings. The $20,000 distributed to American Heart Association will be counted toward his annual required minimum distribution (RMD), and he will not pay income tax on the portion given to charity.
Note: 73 is the age when required to take out the RMD. The earliest age John can withdraw voluntarily from his retirement is 59.5. And the earliest he can make a QCD is 70.5. These numbers can get confusing because if John is between 70.5 and 73, he can still make a QCD but will not enjoy the tax advantage if he is not taking out a distribution.
Questions and Answers
What's the IRS Rule?For more information, please contact us by phone at 1234567890.
Important Notes:
If your administrator provides you an IRA checkbook, please note that the date of your QCD is NOT the date you send the distribution check, but the date that your IRA administrator transfers the funds to the charity. If you want your distribution check to be credited toward the current tax year, it is critical that you mail your check several weeks before the end of the year to ensure there is time for the check to be received by common reporting standards (CRS) and to clear your account. This is especially true if you are relying on those gifts to fulfill your required minimum distribution.
Documentation
There are several ways to send a gift from a qualified retirement account to American Heart Association. Once you've decided how you want the check sent to us, follow the appropriate procedure below.
If you are requesting that your IRA administrator send a check directly to American Heart Association:
- Notify your plan administrator, preferably in writing, that the documentation accompanying the check must include your name and address. You can use our sample letter to make your request.
If you have check-writing capability on your IRA account:
- If your name and address are not printed on your check, include that information along with your check.
If your IRA administrator is sending the check directly to you, the check must be payable to American Heart Association:
- Make a copy of the check for yourself. Send the original check, and include your name and address, to American Heart Association.
An important note: No matter how your check is sent to American Heart Association, we need your name and address to accompany the check in order to correctly credit and acknowledge your gift.
Questions? Please contact us by phone at 1234567890. We are here to help.
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.