Frequently Asked Questions about Gifts from Your IRA
Important forms for 2020 IRA Contributions:
Are you like many Americans who take the standard deduction on their returns?
If you answered “ yes”, you can now deduct cash gifts of $300.00 to places like Mary Baldwin University in addition to your standard deduction. If you are married, and file a joint return, you may deduct up to $600.
Do you itemize deductions on your returns each year?
If yes, this CARES act provision allows you to take deductions for charitable gifts up to 100% of your Adjusted Gross Income – increased from the previous cap of 60%.
Glossary of acronyms that may be used when discussing the IRA Rollover:
QCD = Qualified Charitable Distribution
RMD = Required Minimum Distribution
AGI = Adjusted Gross Income
What is H.R. 2029 — the PATH Act of 2015?
What is a Qualified Charitable Distribution (QCD)?
Any distribution from a traditional IRA made directly by the IRA administrator to Mary Baldwin University (or any charitable organization) that would have been taxable if distributed to the plan participant.
Does anyone who wants to make a charitable distribution from their IRA qualify for a QCD?
No. You must have reached age 70½ by the date of the contribution. It is important to distinguish this rule from the rule that requires plan participants to begin receiving the Required Minimum Distributions (RMD) in the same year they attain age 70½.
Are there limitations on the amount?
Yes. The amount that can be excluded from a plan owner’s income is limited to $100,000 per taxpayer per year. Therefore, a married couple could donate up to $200,000 provided each spouse owns at least one IRA and can each make a qualified charitable distribution of $100,000 from their plans.
Can I designate this IRA distribution to a specific program(s) or scholarship(s)?
Yes, in most cases. However, you may not receive any quid pro quo benefits in exchange for your contribution. Therefore funds that provide recognition benefits, or other tangible benefits are excluded.
Does the distribution fulfill my plan’s Required Minimum Distributions (RMD)?
Yes. If, for example, you are required to withdraw 5% from your IRA for the year, you can direct the entire amount to Mary Baldwin University in satisfaction of the RMD.
Who is the donor – me (the plan participant) or the plan?
You, the individual/plan participant, are the donor of the QCD.
Do I receive a tax deduction for a charitable distribution from my IRA?
No. You do not receive a tax deduction for the charitable distribution.
So what are the advantages of making a charitable distribution from my IRA?
Advantages will vary based on individual circumstances. As always, we recommend that you consult your professional tax advisor. In general, per current tax law, charitable deductions are limited to 50% of a donor’s Adjusted Gross Income (AGI). By making a charitable distribution from your IRA, you will be able to make charitable contributions beyond the above limit without any added tax consequences.
Are other retirement plans eligible?
No. The exclusion applies to traditional IRAs only. Other forms of retirement plans such as 401(k), 403(b) annuities, defined benefit and contribution plans, profit sharing plans, Keoghs and employer-sponsored SEPs and SIMPLE plans are NOT eligible. However, some of the non-eligible plans may afford the opportunity for rollover into an IRA. You should visit with your plan administrator to explore this option.
Can the IRA distribution check be made payable to the individual/plan participant, who then endorses the check to Mary Baldwin University?
No. In order to qualify for the exclusion, the check must be payable directly to Mary Baldwin University.
Can I direct this IRA distribution to a donor advised fund?
Can I direct this IRA distribution to a charitable gift annuity or a charitable remainder unitrust?
Can I designate this IRA distribution to pay on an existing pledge commitment?
Yes. Mary Baldwin will follow the same approach as used for the payment of an existing pledge through a donor-advised fund. We will record the charitable distribution from the IRA as an outright gift and write-off the corresponding donor pledge.
Will I receive a receipt for the gift?
Yes. As such, Mary Baldwin University will provide written acknowledgement to the donor shortly after the gift is received.