Reduce your taxes with an IRA Gift in 2018

July 16, 2018

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Starting this year, the standard deduction has doubled, which will significantly reduce the number of taxpayers who itemize their deductions. If you are 70½ or older (or know someone who is), here is an easy way to help the Jewish community. Rather than simply take your withdrawal this year, you can direct your IRA administrator to distribute a gift from your IRA to benefit the Jewish community. Any transferred amount counts against your required minimum distribution (RMD), and you can direct up to $100,000 to your favorite causes this year. There is no charitable deduction for the IRA distribution; however, not paying tax on otherwise taxable income is the equivalent of a charitable deduction. Qualified Charitable Distributions (QCDs) from IRAs satisfy the Required Minimum Distribution (RMD) and can be made tax-free.

Here are the simple steps toward making an IRA Rollover Gift:
1. Contact your IRA administrator. Because of the popularity of the rollover, most administrators provide forms and a procedure to help you make an IRA rollover gift.
2. Direct a transfer of up to $100,000 from your IRA to the Tidewater Jewish Foundation (TJF). This gift can be designated to benefit any charitable organization or to establish a permanent fund for the benefit of one or more organizations (such as pre-funding your legacy gift).
3. You will pay no income taxes on the amount transferred. Note: Because you are not claiming the transferred amount as income, you will not receive an income tax deduction for your gift.
4. Contact Scott Kaplan at 965-6109 or email skaplan@ujft.org to let TJF know how you would like your gift designated.

Caution: The check from your IRA must be made out to a charity (such as TJF), not to you. Call the financial institution that holds your IRA and ask about its charitable rollover procedures. You will likely need to fill out a simple distribution form, naming TJF or a preferred charity as the recipient and specifying the dollar amount.

Tax-free distributions may only be made from traditional and Roth IRAs. Distributions from employer-sponsored retirement plans, including SIMPLE IRAS, Keoghs, 403(b), 401(k), or profit sharing plans do not qualify. You may roll over a non-qualified pension plan into a qualified IRA (generally tax free to do so) and then the qualified IRA can make a distribution directly to TJF or the designated charity.

Note: IRA distributions cannot go into a donor advised fund, but may go into an endowment or permanent fund for the benefit of one or more agencies.

Advantages of IRA/Charitable Distributions for those 70½ or older:
• Distributions from your IRA directly to charity may count as a Qualified Charitable Distribution (QCD) and toward your Required Minimum Distribution (RMD) of up to $100,000 each year.
• Married spouses can combine their gifts and can contribute up to $200,00 per year.
• Your gift will NOT be counted as income and the IRS will consider your Required Minimum Distribution (RMD) fulfilled, which may save thousands of dollars in taxes.
• Many more taxpayers will take the new higher standard deduction and therefore can’t deduct their charitable gifts. By making gifts directly from their IRAs to qualified charities, the donor can get the equivalent of a deduction by not being taxed on the income.
• For those who still itemize, donors can use distributions from IRAs to make additional gifts because they won’t be taxed on the distributions (equivalent additional charitable deduction).

This information is not intended as tax, legal, or financial advice. Gift results may vary. Consult your personal financial advisor for information specific to your situation.

Scott Kaplan is the president & CEO of the Tidewater Jewish Foundation.

- Scott Kaplan

Letter to the Editor