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How to Make a Tax-Free Gift with an IRA to Help More People Live Well with Parkinson’s

how-to-make-a-tax-free-gift-with-an-ira-to-help-more-people-live-well-with-parkinsons

How to Make a Tax-Free Gift with an IRA to Help More People Live Well with Parkinson’s

Many people in our community have made charitable contributions to support the Foundation’s programs by making a contribution through their IRA with an IRA Charitable Rollover. This strategy can have tax benefits for you and really helps support our mission. This article shares what they are and how they work.

If you’re over 70.5 years old and have an individual retirement account (IRA), the federal government mandates an annual required minimum distribution (RMD) from that account whether you need the income or not.

That RMD counts as taxable income toward your annual gross income and might boost you into a higher tax bracket, reducing your eligibility for some tax credits and deductions. For the charitably inclined, there is the option to gift funds from an IRA that meets RMD conditions and offers advantageous tax protections.

A qualified charitable distribution, QCD, is a special provision of the Protecting Americans from Tax Hikes (PATH) Act in 2015 that allows you to directly rollover RMD funds to an eligible nonprofit without the amount counting towards your taxable income. Also known as an IRA Charitable Rollover, a QCD is an effective tool for managing an annual RMD while also supporting a cause you care about with a charitable gift during your lifetime.

The ABCs of making a qualified charitable distribution to the Davis Phinney Foundation

  • You must be 70 ½ or older at the time you make the request to the IRA administrator.
  • The distribution must be made directly from your IRA to the Davis Phinney Foundation.
  • The maximum QCD amount is $100,000 per IRA owner. A married couple filing jointly qualifies for a maximum of $200,000 QCD.
  • QCD counts toward your annual RMD.
  • You are not required to use all of your RMD for a QCD. Only the amount you direct toward a charity like the Davis Phinney Foundation through a QCD will be removed from your gross income for tax reporting purposes.
  • A QCD cannot be claimed retroactively towards funds already taken as an RMD. However, additional distribution can be made (up to the maximum of $100k per person) in the same calendar year and directed as a QCD and will not be counted as taxable income for the year.
  • Applies only to traditional IRAs. While it is possible to make a QCD from a Roth IRA, there is no advantage as these distributions are already tax-free. Distributions from SEP IRAs, SIMPLE IRAs, retirement assets in a 401(k) or 403(b) are not eligible.

When a qualified charitable distribution to the Davis Phinney Foundation might be good for you

  • You have significant assets in an IRA and do not rely on your RMD for income and living expenses.
  • You take the standard deduction when filing taxes rather than itemize. A QCD gives you a tangible tax benefit from your donation in addition to your standard deduction claim.
  • You want to lower your adjusted gross income (AGI) to reduce income taxes and maintain eligibility for the lowest cost Medicare premiums.

Two ways a qualified charitable distribution can come from your IRA

#1 – IRA Check Issued by Account Administrator

The easiest and most common method is to request a check from your IRA custodian with an issue date before December 31st. The allocation is debited immediately and becomes a qualified QCD for 2019 upon issue regardless of when the check is cashed.

The check must be payable to the Davis Phinney Foundation directly.

If a check is made payable to you, the distribution would not qualify as a QCD. Any distribution taken into a personal account prior to donation will count as taxable income.

You can request to have the check mailed directly or delivered to you should you wish to deliver it personally.

#2 – IRA Check from Personal Account Checkbook

IRA owners who have been issued a checkbook for their retirement account can write a check on their own but must report the distribution to their IRA administrator and confirm the check is cashed prior to December 31st. To qualify for a current-year QCD using this method, we recommend contacting your IRA administrator immediately for details.

Note – Be sure to collect a Form 1099 from your IRA administrator and share with your tax preparer to receive tax benefits from the distribution.

Want to Set Up a qualified charitable distribution to the Davis Phinney Foundation?

  • Contact your IRA custodian, financial or legal advisor to ensure you meet the requirements and reporting details of this special tax provision.
  • If you include the Davis Phinney Foundation in your 2019 qualified charitable distribution, please use our legal name and tax ID number by the December 31st, 2019 deadline.

Name: Davis Phinney Foundation 
Address: 357 S. McCaslin Blvd., Suite 105, Louisville, CO 80027 
Tax ID: 20-0813566

  • Contact Rich Cook or call 1-866-358-0285 to inform us of your 2019 QCD or for further questions on how you can include the Davis Phinney Foundation in 2020 and beyond.

Additional Resources

Qualified Charitable Distributions
Donating to a charity using a qualified charitable distribution
IRA FAQs – Distributions (Withdrawals)
Required Minimum Distribution (RMD) Calculator

Disclaimer: The purpose of this is to provide general information on the subject of charitable donation through a qualified charitable distribution of an IRA. It is not intended as legal, tax accounting or other professional advice. Please consult a financial or legal professional for advice on charitable giving and any possible tax implications.

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