Don’t miss an opportunity to take advantage of the now permanent IRA Rollover rules

The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income (and count toward their required minimum distribution) certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities.

Knife Edge in Goat Rocks Wilderness.

Photo by Luc Mitchell.

On Dec. 18, 2015, Congress passed the IRA Charitable Rollover and the president signed it into permanent law. The rules allow taxpayers age 70 ½ or older to transfer up to $100,000 annually from their IRA accounts directly to charity, such as the Pacific Crest Trail Association, without first having to recognize the distribution as income and thereby pay federal income taxes.

If you plan to take advantage of this provision action needs to be taken quickly, as PCTA (or any nominated charity) has to receive the distribution by Dec. 31, 2016 in order for the donation to qualify for federal tax-free status in 2016.

Anyone considering this strategy should consult their tax or financial advisor to determine how a distribution from your IRA to the PCTA will impact your particular situation.

Here are some FAQs concerning IRA Rollovers

What gifts would qualify for a 2016 charitable IRA rollover?

A gift that qualifies, technically termed a “qualified charitable distribution,” would be:

  • Made by a donor age 70 ½ or older
  • Transferred from a traditional or Roth IRA directly to a permissible public charity, such as the Pacific Crest Trail Association.
  • Completed in calendar year 2016 for the 2016 tax year.

Who can benefit from using the charitable IRA rollover to make a gift?

  • Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
  • Persons with significant assets in an IRA.
  • Persons having so few deductions they chose not to itemize.

If I made a charitable IRA rollover gift in other tax years, can I do this again for the 2016 tax year?

Yes. Even if you and your spouse both made the maximum $100,000 charitable IRA rollover gift to a qualifying charity during one or more previous years, you can still take advantage of this legislation again for the 2016 tax year. However, you generally cannot make more than one rollover from the same IRA within a one-year period. You also cannot make a rollover during this one-year period from the IRA to which the distribution was rolled over.

Note: Many IRA owners who qualify and do not need the income generated from a taxable required minimum distribution (RMD) will satisfy their RMD and charitable donation in one transaction.

For further information on how you can make a donation to PCTA, please contact Shari Hansen at (916) 285-1851 or [email protected].

Author: Mark Waters

As the Pacific Crest Trail Association’s Associate Director of Philanthropy, Mark helps develop compelling opportunities for donors to support the PCTA and make the experience of giving satisfying and rewarding. He enjoys spending his free time playing and exploring with his sons.