Charitable IRA Rollovers, also known as Qualified Charitable Distributions (QCDs), are tax-savvy ways for many people aged 70 ½ or older to make charitable gifts. We have compiled a list of frequently asked questions here. Please contact the Office of Gift Planning at 765-361-6135 or email giftplanning@wabash.edu if you need further assistance.
WHAT IS A CHARITABLE IRA ROLLOVER?
A Charitable IRA Rollover, also known as a QCD, is a gift from an Individual Retirement Account (IRA) to a qualifying charitable organization, such as Wabash College, sent directly from the IRA to the charity.
IS A QCD THE SAME THING AS A CHARITABLE IRA ROLLOVER?
Yes. A QCD is the language used in the tax code and it is also often, commonly referred to as a Charitable IRA Rollover.
WHAT IS THE MINIMUM AGE FOR MAKING A CHARITABLE IRA ROLLOVER GIFT?
You must turn 70 ½ prior to requesting the distribution.
WHEN AM I REQUIRED TO START REQUIRED MINIMUM DISTRUBUTIONS (RMDs)?
You must take your first RDM for the year in which you reach age 73. However, you can delay taking the first RMD until April 1 of the following year.
HOW DO I CREATE A CHARITABLE GIFT ANNUITY USING A CHARITABLE IRA ROLLOVER?
Starting in 2024, the SECURE ACT 2.0 permits an IRA to Gift Annuity Rollover where each eligible tax payer over the age of 70 ½ can execute a QCD from their traditional IRA up to $53,000 in total in one year only. Multiple charities may be allowed to contract Charitable Gift Annuities (CGAs) so long as the $53,000 cumulative total of all CGA contracts is not exceeded that year. Also, once a CGA is created in a given year, no additional years are permitted for creating a CGA with a QCD, even if the original $53,000 threshold wasn’t reached in the first year the contract was issued.
WHAT IS THE TAX TREATMENT FOR CHARITABLE IRA ROLLOVERS?
There is no income tax deduction for a Charitable IRA Rollover because the funds are never included in the donor’s income in the beginning. Accordingly, ordinary income tax, which would otherwise be due on withdrawals from an IRA, is not assessed on the gift. For people who do not itemize their taxes, this may be more beneficial than a tax deduction.
You may find it advantageous to make a Charitable IRA Rollover gift in the absence of being required to take your RMDs so that when it’s time to take RMDs, you may possibly lower your tax liability. If an account owner fails to withdraw a RMD, fails to withdraw the full amount of the RMD, or fails to withdraw the RMD by the applicable deadline (including QCDs to charity), the amount not withdrawn is taxed at 50%. Please consult your tax advisor regarding the best charitable and financial strategy for your situation.
WHAT TYPE OF ACKNOWLEDGEMENT SHOULD I EXPECT?
Wabash will send you a written acknowledgment of your gift to thank you and to confirm the amount of your gift and its intended purpose. Because there is no income tax deduction, you will not receive a conventional receipt.
I HAVE A ROTH IRA. CAN I USE IT FOR A CHARITABLE IRA ROLLOVER?
Roth IRAs are eligible for rollover treatment, however, because distributions from Roth IRAs are not taxed as ordinary income, you may wish to discuss with your financial advisor whether this is the best way for you to give.
I DO NOT HAVE AN IRA. CAN I MAKE A CHARITABLE IRA ROLLOVER FROM ANOTHER RETIREMENT ACCOUNT?
No, transfers must come directly from an IRA. However, if you have retirement assets in a 401(k), 403(b) or other qualified funds, you may be able to roll those funds into an IRA, then use the IRA for charitable giving. Please discuss this with your financial advisor.
WHAT IS THE MINIMUM GIFT SIZE?
The minimum gift size depends on the policies of your IRA custodian. In 2024, the maximum distribution for an outright gift from your IRA is $105,000, per account holder, per year. The minimum distribution for a Charitable IRA Rollover to a CGA is currently $10,000 at Wabash, and the maximum distribution for all Charitable IRA Rollovers to all charities for a CGA is $53,000 in one year only. The cumulative total of all Charitable IRA Rollover gifts, which may be a combination of outright gifts and CGAs, may not exceed $105,000 in a given year.
ARE THERE RESTRICTIONS ON THE CHARITABLE IRA ROLLOVER?
A rollover cannot be used to make gifts when the donor receives a benefit in return (i.e. to attend a dinner).
HOW DO I INITIATE A CHARITABLE IRA ROLLOVER?
You should start by contacting your IRA custodian. Only custodians of IRAs are permitted to make Charitable Rollovers on behalf of their account holders. If you have check-writing privileges on your IRA, your IRA custodian must act on your behalf – checks must be written by your IRA custodian to Wabash College. If you receive a check from your custodian payable to Wabash College, the gift is considered complete only after funds have been withdrawn from your account. If you’re relying on a QCD to satisfy in part or whole, your RMD for the taxable year, you’ll want to be especially careful to time your gift so that funds are withdrawn before December 31.
Please let us know that a Charitable IRA Rollover is being initiated. Occasionally we receive funds from an IRA custodian without the donor’s name or desired gift designation attached.
ARE THERE SPECIAL FORMS I NEED TO USE?
IRA custodians are becoming very familiar with these types of gifts. Our IRA custodian tool may help you to determine if your custodian has its own form to request the transfer; if not, please visit our IRA Charitable Rollover Instructions to find a sample instruction letter to your IRA custodian.
Please let us know that a Charitable IRA Rollover is being initiated. Occasionally we receive funds from an IRA custodian without the donor’s name or desired gift designation attached.
WHEN CAN I INITIATE A REQUEST FOR A QCD FOR THE CALENDAR YEAR?
You may request a distribution at any time after reaching 70 ½ years of age. The funds must generally come out of your IRA by December 31 each year. However, please begin your transfer by early December to allow ample time for your transfer to be completed and cashed by Wabash College.
CAN MY IRA GIFT SATISFY A PLEDGE OR CREATE AN ENDOWED FUND?
Yes. Payment schedules of various lengths may be established by the donor with a maximum duration of five years.
HOW DO I KNOW IF A CHARITABLE IRA ROLLOVER IS RIGHT FOR ME?
If you are over the age of 70 ½ and have an IRA, the rollover might be right for you if:
I HAVE MORE QUESTIONS. WHOM SHOULD I CONTACT?
Please call the Office of Gift Planning at 765-361-6135 or e-mail us at giftplanning@wabash.edu