Use Your Traditional IRA to Make Your Charitable Gifts This Year

As you plan your minimum required distributions for this year, if you do not need the money the government is requiring you to take out, consider using it for a charitable gift to support Silver Cross Hospital’s mission. You can direct that amount to the Silver Cross Foundation with no federal income tax liability.

In 2006 Congress made a change to the tax law that allows individuals aged 70½ and over to make charitable gifts directly from a traditional IRA account without incurring federal income tax on the withdrawal, while still counting the amount transferred toward their Required Minimum Distributions (RMDs). Many people have not heard about this option for making charitable gifts because it used to be a pretty inconvenient provision, expiring every two years until Congress repeatedly and sometimes belatedly renewed it.

The Protecting Americans from Tax Hikes Act of 2015 changed all that, making this provision a permanent part of the tax code (to the extent anything is permanent with Congress). The IRA Charitable Rollover provides you with an excellent opportunity to make gifts during your lifetime from an asset that might be subject to multiple levels of taxation if it remained in your taxable estate. Although the SECURE Act moved the Required Beginning Date (RBD) for mandatory distributions from an IRA to age 73 in effective Jan. 1, 2023, this does not affect the QCD.

To qualify:

• You must be age 70½ or older at the time of gift.
• Transfers must be made directly from a traditional IRA account by your IRA administrator to the SILVER CROSS FOUNDATION. Funds that are withdrawn by you and then contributed do NOT qualify.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 do not qualify.

Qualified charitable distributions:

• Can total up to $100,000 per year.
• Are not included in your gross income as reported on IRS Form 1040
• Don’t give you a charitable deduction since the tax break comes from excluding the distribution from income.

Example: Suppose John wants to contribute $20,000 to the Silver Cross Foundation. He has $500,000 in an IRA. Because of his age and the age of his spouse, he has to take a required minimum distribution of $25,000. He doesn’t need that much cash and hates the idea of paying tax on it. Rather than withdraw the $25,000 and pay taxes on the full amount, he can authorize the administrator of his IRA to transfer $20,000 to the Silver Cross Foundation and $5,000 to himself. The $20,000 will count toward his minimum distribution, but will not be subject to federal tax.

Using the IRA Charitable Rollover is a simple, meaningful and tax-efficient way to support a mission you believe in – improving the health of those Silver Cross Hospital serves and advancing wellness our community.

The distribution must be made by the administrator of your IRA. Download a sample letter of instruction here.

For more information, please feel free to contact Tracy Simons at (815) 300-7113 or tsimons@silvercross.org.

IRA administrators don’t always include the donors’ names on distribution checks. If you’re planning to make a distribution to the Silver Cross Foundation from your IRA, please let us know in advance so we’ll be able to identify your gift. Also let us know if you want your gift used for a particular purpose. Thank you!