Charitable IRA Rollover: This money-saving feature is now a permanent part of the tax code and can be used to support the Institute

February 27, 2017

We all understand our tax dollars fund necessary government programs and services, but isn’t it nice to direct your dollars to a nonprofit cause you believe in and reduce your tax burden at the same time?

If you have an IRA, there’s a simple way to donate and maximize your support for the Institute while minimizing your tax burden: an IRA charitable rollover. This charitable-giving option has been available since 2006, but it was made a permanent feature of the tax code in 2015. The IRA charitable rollover provision allows you to make a donation directly from your IRA to the Institute each year in any amount up to $100,000—tax-free once you reach the age of 70 1/2.

  • Once you reach 70-1/2 years of age, you must take a mandatory minimum distribution from your IRA each year whether you want to or not. 
  • To qualify as a charitable rollover, your broker has to take care of it, and the money must be transferred directly from your IRA to the Institute. You can even set up an annual IRA charitable rollover. 

WHEN IS AN IRA CHARITABLE ROLLOVER THE RIGHT CHOICE?

It may be a good choice for donors who either don't rely on their IRA for income or for those who want a tax break and want to make a donation to the Institute with the least amount of fuss. Here are a few examples:

irarollovernews1If you don’t rely on your IRA for income:
John and Lisa have saved more than $1 million in their IRAs. Now that they are in their 70s, they must take annual distributions. Because they don’t need the money, they opt to receive the minimum payout, which is heavily taxed. They had planned to leave the remainder of the IRAs to the Institute, but by using the charitable rollover option, they can each transfer up to $100,000 annually directly from their IRAs to the Institute. Not only does this decrease their tax burden, it allows the Institute to advance cancer research now—and lets John and Lisa see the results of their generosity immediately.


irarollovernews2If you want to decrease your tax burden:
Each year, Marilyn donates $2,000 to the Institute. She withdraws it from her IRA and writes a check to Saint John’s Health Center Foundation, which sends her a receipt. On her tax forms, Marilyn must report the amount as taxable income and deduct it as a charitable gift—but that income pushes her into a higher tax bracket, and her increased tax burden outweighs the reduction for her charitable donation. For 2016, though, Marilyn has heard about the IRA charitable rollover option. She calls Tanya Lopez, Saint John’s Health Center Foundation director of planned giving, to get the Institute's information and gives it to her IRA manager, along with instructions to transfer $2,000 to the Institute. That's it—she does not report the donation anywhere on her taxes, and it does not increase her income.


Our staff can prepare personalized, confidential examples for you and work with your financial advisors. Please contact Tanya Lopez, director of planned giving, at 310-582-7095.