The IRA charitable rollover, also known as a Qualified Charitable Distribution (QCD), allows IRA holders aged 70 ½ or older to donate money from their Traditional or Roth IRA (including inherited IRAs) tax-free to a qualified charity.
Requirements for an IRA Charitable Rollover:
- The IRA holder must be at least 70 ½ years old by the date the QCD check is issued. For inherited IRAs, the beneficiary must also have reached this age.
- Funds must be transferred directly to a qualified charity from a Traditional or Roth IRA.
- Qualified charities include most public charities, such as religious institutions, certain veterans’ organizations, fraternal societies, and community foundations. The charity must be eligible for deductible contributions.
- The donor cannot receive any benefit from making a QCD*, and the QCD cannot be directed to a donor-advised fund (DAF).
- Individuals can exclude up to $100,000 in QCDs annually from their taxable income. However, deductible contributions made during or after the year the individual turns 70 ½ will reduce the amount that can be excluded. Consult your tax advisor to determine the tax-free amount you may withdraw.
- To qualify for the current calendar year, checks must be issued by December 31.
*Note: Individuals can make a one-time QCD of up to $50,000 to entities that were previously ineligible for QCDs, such as charitable remainder annuity trusts, charitable remainder unitrusts, and charitable gift annuities that meet specific criteria.
Eligible Nonprofits for an IRA Charitable Rollover:
IRA charitable rollover gifts must be made directly to a 501(c)(3) public nonprofit, such as the Otsego Community Foundation (OCF). The OCF accepts IRA charitable rollover transfers to establish a new fund or contribute to an existing one.
Qualifying Funds at OCF:
- Funds for the Community: These unrestricted funds are created by generous individuals, families, and businesses and complement the Community Fund. The OCF and its Grants Committee decide how to best allocate these funds to meet community needs each year.
- Designated Funds: Donors or nonprofits establish these funds to benefit specific nonprofits, educational institutions, or religious organizations. They provide immediate support and enhance future resources for these organizations.
- Field of Interest Funds: These funds allow donors to support specific causes they care about, such as arts and culture, youth development, education, mental health, and more.
- Scholarship Funds: These funds support undergraduate and graduate education, professional development, and other educational opportunities.
How to Initiate an IRA Charitable Rollover:
- Contact Dana Bensinger at 989-731-0597 or dana@otsegofoundation.org.
- Consult your financial or legal advisor for guidance.
- Request your IRA administrator to initiate the transfer directly to the Otsego Community Foundation. (Note: To maintain tax-free status, the donation must go directly from your IRA to the Community Foundation without passing through you.)