Now it’s easier than ever to make the gift of a lifetime. IRAs can qualify for tax-free charitable distributions.
The Community Foundation of Greene County can help turn your individual retirement accounts (IRAs) into tax-saving charitable gifts. Extended tax benefits allow more people to experience the joy of giving during their lifetimes.
You can give more for less.
Thanks to the new legislation, American seniors can make the gift of a lifetime by giving their IRAs to charity without federal tax penalty. So your retirement funds can go further than ever before.
For years, estate planners have recommended that retirement assets may be the most tax-effective asset in larger estates to distribute to charity. These assets are not only vulnerable to heavy taxation as part of an estate but also can be taxed again as income in respect to a decedent on the tax returns of heirs.
Until recent legislation, there was a disincentive for retirees to give IRAs to charity during their lifetimes because withdrawals from IRAs were subject to income tax—even those given to charity.
Tax law extension.
Annually, retirement assets may become a preferred charitable gift for seniors. IRA distributions to charity can now again receive special tax advantages. Americans age 70½ and up can make tax-free IRA contributions to public charities such as your community foundation.
You can make a difference.
Your community foundation can help you connect to the causes you care about most. You can set up a charitable fund in your name or make an unrestricted gift. Giving is one of life’s pleasures; we can help you enjoy it today.
By giving through your community foundation, you can use your gift to meet ever-changing community needs—including future needs that often cannot be anticipated at the time your gift is made. Your gift can target the causes and programs you care about most.
The Community Foundation of Greene County understands our community’s most pressing issues and can help you establish a fund to make an impact in areas of need or opportunity that are important to you.
Here are four great ways to turn your IRA into community good:
- Unrestricted Fund —Meeting ever-changing community needs.
- Address a broad range of current and future needs. The Community Foundation of Greene County evaluates all aspects of community well-being—arts and culture, community development, education, environment, health and human services—and awards strategic grants to high-impact projects and programs.
- Field of Interest Fund—Connecting personal values to high-impact opportunities.
- Target gifts to the cause most important to you: arts, education, health environment, recreation, economic development, youth welfare and more. The Community Foundation of Greene County awards grants to community organizations and programs addressing your special interest area.
- Designated Fund—Helping local organizations sustain and grow.
- Support the good work of a specific nonprofit organization—a senior center, museum, your church, or any qualifying nonprofit charitable organization—by creating a specially Designated Fund. The community foundation will invest your gift for long-term growth and issue grants to your favorite nonprofit on a regular basis.
- Scholarship Fund-Help students access educational opportunities.
- Provide scholarships for students to attend school from Pre-Kindergarten though Post-Secondary schools.
To learn more contact Bettie Stammerjohn, firstname.lastname@example.org.
Frequently Asked Questions about Charitable IRA gifts
Instead, IRA holders may choose to leave their IRAs to qualified charitable organizations—choosing charity over taxes.
- Generous donors—When making a major gift, some taxpayers may give more to charity than they can deduct that year. Donors cannot deduct more than 50 percent of their income for gifts of cash to public charities (30 percent, if giving to private foundations). Although amounts over 50 percent can be carried forward and deducted in future years, taxpayers will face an immediate tax bill and may lose some of the benefit of the deduction if they die before the gift has been fully deducted. Donors who consistently give above the limit will not be able to take advantage of the carry forward provisions.
- Non-itemizers—Donors who regularly give a portion of their income to charity are not able to enjoy a tax break from the contribution because the standard deduction is still greater than the total of all itemized deductions. This may be especially true if state and local income taxes are low.
- Financially comfortable—Individuals or couples who distribute the minimum from their IRA—and have other forms of income to pay living expenses—may find that transferring their minimum distributions to the community foundation helps fulfill personal charitable goals, tax-free.
In the past, when a donor of any age withdrew IRA funds to make a charitable gift, he or she was liable to pay income tax on the withdrawal, offset to varying degrees by a charitable deduction for the gift.
As a consequence of this unfavorable tax treatment, very few individuals donated IRA funds to charity during their lifetimes.
This provision is permanent.
Now it is easier than ever for more people to enjoy the experience of making the tax-free gift of a lifetime using their excess retirement assets.
Donors may choose to contribute additional amounts to charity; however, the extent to which additional amounts can be deducted from their income will be determined following general rules of itemized deductions where the charitable percentage limitations and itemized deduction reduction are factors.
These taxpayers can lose up to 80 percent of the value of their deductions because most itemized deductions have to be reduced by 3 percent of the amount by which the taxpayer’s income exceeds a certain number, or 80 percent of the taxpayer’s itemized deductions.
Example: A married couple filing jointly has $500,000 in adjusted gross income (AGI) and because their AGI exceeds the $305,050 threshold, the 3 percent reduction applies to this couple’s itemized deductions.
Excess of couple’s AGI over $305,500 = $194,950
3% reduction x 3%
Reduction of itemized deductions $5,848.50
The couple’s itemized deductions will be reduced by the lesser of $5,848 or 80% of the itemized deductions.
Does a donor also receive a charitable deduction when he or she transfers assets to a charity under this provision?
Are there any IRA transfers to the community foundation that do not qualify for preferred tax treatment?
Because such transfers do not count as qualified distributions under these special rules, the donor will have to first recognize those distributions as income. The donor’s charitable deduction must then be calculated as a regular itemized deduction.
The information provided here is based on analysis of recent legislation. Every effort has been made to ensure accuracy of the answers to these questions. However, due to the complexity of the tax law and the fact that many of these provisions introduce issues that are new to the Internal Revenue Code, this information may be subject to change. It is not a substitute for expert legal, tax or other professional counsel and we strongly encourage donors to work with their professional advisors to determine the impact of this legislation on their particular situations. This information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.
To determine the method, or mix of methods, that make the most sense for structuring a gift through the Community Foundation of Greene County (Pa), this information should be reviewed with a competent financial, tax or estate planner.
The Community Foundation of Greene County (Pa) does not actively seek donations from outside of Pennsylvania. All information on this website related to seeking donations to The Community Foundation of Greene County (Pa) is void where prohibited by law.
The Community Foundation of Greene County is a nonprofit 501(c)3 organization that develops, manages and distributes funds for charitable purposes in the community. The official registration and financial information of the Community Foundation Greene County may be obtained from the Pennsylvania Department of State by calling toll-free, within Pennsylvania, 1-800-732-0999.