Use Your Traditional IRA or Roth IRA to Make Your Charitable Gifts

After several years of short-term authorization, the IRA Charitable Rollover has been made permanent. The IRA Charitable Rollover provides you with an excellent opportunity to make a gift during your lifetime from an asset that would be subject to multiple levels of taxation if it remained in your taxable estate.

To qualify

  • You must be age 70½ or older at the time of the gift.
  • Transfers must be made directly to Middlebury from a traditional IRA account or Roth IRA account by your IRA plan administrator. Funds that are withdrawn by you and then contributed do NOT qualify. Gifts from 401k, 403b, SEP and other plans do not qualify.
  • Gifts must be outright. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities are not allowed.

Benefits — qualified charitable distributions

  • You can contribute to one or more qualified charities;
  • The total amount you can distribute in one year to all charities is $100,000.
  • Distributions to qualified charities are not included in your gross income for federal income tax purposes on your IRS Form 1040 (no charitable deduction is available, however).
  • Count towards your minimum required distribution for the year from your IRA.

Example

Gamaliel Painter wants to make a contribution to Middlebury. He has $500,000 in his IRA and he wants the contribution to be $20,000. He can authorize the administrator of his IRA to transfer $20,000 to Middlebury and $5,000 to himself. The $20,000 distributed to Middlebury will not be subject to federal tax and will be counted toward his annual minimum required distribution.

Joseph Battell wants to make annual gifts to Middlebury and several other charities he regularly supports. His required minimum distribution is $20,000. He authorizes his plan administrator to make $200 gifts to Middlebury and nine other charities. The two thousand dollars distributed to the charities counts towards his $20,000 required minimum distribution. He pays federal income tax on only $18,000.

As you plan your minimum required distributions for this year, if you do not need the money the government is requiring you to take, consider using it for a charitable gift using the IRA Charitable Rollover.

Questions and Answers

Who qualifies?

Individuals who are age 70½ or older at the time of the contribution (you have to wait until your actual 70½th birthday to make the transfer).

How much can I transfer?

Up to $100,000 per year.

From what accounts can I make transfers?

Transfers must come from your IRAs directly to Middlebury. If you have retirement assets in a 401k, 403b etc., you must first roll those funds into an IRA, and then you can direct the IRA administrator to transfer the funds from the IRA directly to Middlebury.

To what charities can I make gifts?

Deductible contributions can be made to tax-exempt organizations that are classified as 501(c) (3) charities, including Middlebury.

Can I use the IRA Charitable Rollover to fund life-income gifts (charitable gift annuities, charitable remainder trusts, or pooled income funds), donor advised funds or supporting organizations?

No, these are not eligible.

How will Middlebury count the gift?

We will give you full credit for the entire gift amount.

What are the tax implications to me?
  • Federal — You do not recognize the distribution to Middlebury as income, provided it goes directly from the IRA administrator to Middlebury. However, you are not entitled to an income tax charitable deduction for your gift.

  • State — Each state has different laws, so you will need to consult with your own advisors. Some states have a state income tax and will include this distribution as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their state income tax on the federal income or federal tax paid. Still other states have no income tax at all.
Does this transfer qualify as my minimum required distribution?

Once you reach age 70½, you are required to take minimum distributions from your retirement plans each year, according to a federal formula. IRA Charitable Rollovers count towards your minimum required distribution from the IRA for the year.

Can my spouse also make an IRA Charitable Rollover, even if we are married and file jointly?

Yes, every individual who meets the qualifications can use the IRA Charitable Rollover for gifts up to $100,000 each year.

How do I know if an IRA Charitable Rollover is right for me?

You are at least age 70½, and:

  • You do not need the additional income necessitated by your minimum required distribution, OR
  • Your charitable gifts already equal 50% of your adjusted gross income, so you do not benefit from an income tax charitable deduction for additional gifts, OR
  • You do not itemize deductions, OR
  • You are subject to income phase-outs on your income tax deductions.
What is the procedure to execute an IRA Charitable Rollover? 

We offer a sample letter you can send to your plan provider to initiate a rollover. Make sure that you contact us when you direct the rollover so we can look for the check from your IRA administrator.

Gift Administration
Middlebury College
700 Exchange Street
Middlebury, VT 05753
802.443.5922
mga@middlebury.edu