If you are 70 ½ or older and interested in knowing about a strategic way to support Fay School through a tax free distribution from your IRA, please read on:
Required Minimum Distribution Tax Break Becomes Permanent
In December 2015 The Consolidated Appropriations Act of 2016 made permanent qualified charitable distributions from individual retirement accounts. This was good news for Fay and for individuals 70 ½ or older who would like to use assets held in a traditional IRA for charitable purposes.
How does it work?
Individuals who are 70 ½ or older may make a “qualified charitable distribution” from their traditional IRA accounts directly to Fay School and exclude that distribution from their gross income calculation for that tax year. Additionally, the amount distributed to Fay through a “qualified charitable distribution” may serve in place of some or all of the “required minimum distribution” (RMD) individuals 70 ½ or older are required by law to take each year before December 31.
Donors who may benefit from this giving technique are those:
- Who are required to take minimum required distributions but who do not need the income.
- Who want to avoid the tax implications created by accepting your “required minimum distribution” as income.
- Whose major assets reside in their IRAs and who would like to support Fay School during their lifetimes rather than, or perhaps in addition to, through an estate gift.
A few limitations do apply:
- The maximum amount that can be directly transferred to Fay through a “qualified charitable distribution” is $100,000. Any amount up to $100,000 is permitted.
- The distribution must be made by the trustee of the IRA account directly to the School. You as the account owner should not take possession of the funds at any time during the transaction, as that will create the taxable event that the IRA charitable rollover is designed to avoid.
- The giving technique is available only from traditional IRA accounts. Distributions from other types of retirement accounts – i.e., 401(k) and 403(b) accounts – are not eligible for this favorable tax treatment.
If you would like to learn more about this tax-advantaged giving technique, please call the Office of Advancement at Fay School at 508-490-8414 or consult your personal philanthropic or tax advisor. The School stands ready to assist and facilitate your plans to take advantage of this opportunity.
The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax adviser. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results.