Nonprofit News: Empowering Creative Giving and the IRA Rollover
Have you ever considered promoting the value of an IRA Charitable Rollover to your donors? Do you want to know more?
Simply put, an IRA Charitable Rollover, also known as a Qualified Charitable Distribution or QCD, is a tax-free donation from a traditional IRA to a qualified charitable organization.
Beginning at age 73, individuals with IRAs must take Required Minimum Distributions each year, even if they don’t need or want the funds. That same Required Minimum Distribution then increases the recipient’s total taxable income.
Donors Mike and Jane Lodes with scholarship recipient Titus Wright. The Lodes’ used an IRA Rollover gift to establish a scholarship at OCCF in 2022.
A QCD allows individuals aged 70½ and older to make charitable contributions, up to $108,000 per year, that may satisfy part or all of their Required Minimum Distribution.
Let’s examine a case study to illustrate the impact of an IRA rollover on your donor and your charity.
What is an IRA Charitable Rollover Anyways?
An IRA Charitable Rollover, also known as a Qualified Charitable Distribution or a QCD, is a tax-free donation from a traditional IRA to a qualified charitable organization. It allows individuals aged 70½ and older to make charitable contributions that may satisfy part or all of their Required Minimum Distribution. The maximum amount of a QCD is $108,000 per year for 2025.
Case study: Enhancing Gift Impact and Tax Savings With a QCD:
The Scenario: Thomas turned 73 years old and must take his first RMD from his traditional IRA this year. His traditional IRA is valued at $500,000, resulting in a projected RMD of $18,867 on top of his ordinary income of $78,000 he earns as a consultant.
Each year, Thomas donates about $14,000 to nonprofits, but he does not itemize his deductions on his tax return. Using standard deductions and the single-filing status, Thomas realizes that if he adds his RMD to his current income, he will owe an extra $4,147 in taxes.
The Solution: Thomas reads about the impact of a QCD in his favorite nonprofit’s newsletter. He talks to his financial advisor and discovers that rather than giving $14,000 from his income, he can direct his RMD as a QCD to charity, he can satisfy his RMD requirements and the IRA distribution will not show up as taxable income. Thomas directs the entire RMD ($18,867) to his favorite charity’s capital campaign, the most significant gift he has ever given.
Ultimately, Thomas was excited to see his potential tax bill reduced and his charitable giving increased by 25%!
This scenerio highlights a couple of key points.
First, the use of a QCD can be a win-win for donors and nonprofits, reducing taxable income and increasing donations. By talking with donors about strategic tools like an IRA Charitable Rollover gift, you are presenting an opportunity for donors to maximize their impact without reducing their immediate cash flow.
Second, including information about strategic giving options in your regular materials, like a newsletter, plants the seed without you having to create and print extra materials.
Remember, the Oklahoma City Community Foundation is your partner. We navigate complex gifts and non-cash assets every day, and our expert team can work with you on strategic approaches that extend your donor’s legacy and support your organization.
Remember, we are your partner, and we can help you navigate complex gifts and non-cash assets that you might not otherwise be able to accept. Give us a call so we can talk through options before turning away a gift!