IRA Charitable Rollovers
Your IRA Can Now Be Used to Bless Israel – and Lower Your Tax Bill
If you are at least 70-and-a-half years old, you may now make a tax-favored charitable gift from your IRA account to The Fellowship.
It’s called the “IRA Charitable Rollover.” It can help you save on taxes even if you don’t itemize on your income tax return. And, it offers special benefits for high-earners in high tax brackets.
Here’s how it works:
You can transfer any amount from your IRA, up to $100,000, directly to The Fellowship free from federal income tax. The key advantage of giving directly from your IRA is that the amount contributed counts toward your required IRA minimum withdrawal amount for the year of the gift. There is no income tax on the amount transferred to The Fellowship from your IRA.
Tax savings for non-itemizers
Most Americans do not “itemize” deductions on their tax returns and instead take the “standard” deductions. Ordinarily, if you don’t itemize – you don’t get to enjoy a tax break in return for your gift to charity. But the new Charitable IRA Rollover allows you to save on taxes even if you don’t itemize!
John, age 75, makes a contribution of $1,000 to The Fellowship each December. In past years, he wrote a check to make his gift. Since he takes the standard deductions on his tax return and does not itemize, this gift has no effect on his taxes.
This year, however, instead of writing a check directly, John called his IRA Administrator and directed that the amount of $1,000 be sent from his IRA account to The Fellowship as an IRA Charitable Rollover gift. This amount counts as part of his annual required minimum distribution from his IRA. Since this gift goes to charity instead of to John, it is not counted as taxable income, thus reducing his overall tax bill for the year.
Savings for higher income taxpayers
If you do itemize on your tax return, charitable gifts you make are deductible and have the effect of reducing your taxable income and taxes. But as your income increases, the benefit of the charitable income tax may be eroded by “phase outs” which reduce the allowable deduction. Depending on your income, up to 80% of your charitable deduction may be lost. However, the practical benefit of the charitable contribution can be fully retained when a gift is made from an IRA instead of a gift of cash or appreciated property.
Ellen, a medical doctor, and her husband Marvin give $10,000 each year to The Fellowship. Even though they itemize on their tax return, they don’t receive the full benefit of the gift. Because of their high income, their itemized deductions are reduced by 50%. In effect, only $5,000 of their gift is deductible. However, Ellen has an IRA, which she will use this year to make the couple’s gift. Instead of receiving her requirement minimum distribution directly from the IRA, which would have been counted as taxable income, she directs her plan administrator to make a Charitable IRA Rollover gift to The Fellowship, reducing their taxable income by the full amount of the gift.
Please note that under current law, this plan may not be used to establish a charitable gift annuity.To make a gift under the IRA Charitable Rollover, do not withdraw funds prior to making the gift, but instead have the gift amount distributed directly from your IRA to The Fellowship at the following address:
International Fellowship of Christians and Jews
Office of Gift Planning
30 North LaSalle Street, Suite 4300
Chicago, IL 60602
As always, please consult your personal professional advisor before making a gift.
May we help you?
If you have questions, please contact The Fellowship’s Planned Giving Department by email or by phone at (888) 588-4325.
Names and some details in examples have been changed to protect privacy.