Understanding IRA Rollovers

What are Required Minimum Distributions (RMDs)?

The IRS requires owners of IRAs to begin annual withdrawals from these accounts after they turn 70½ years old. The amount that you have to withdraw is determined by your age, the amount you have saved in an IRA, and your life expectancy.

These distributions must be made each subsequent year, and failing to make a withdrawal may result in penalty taxes on the amount that should have been withdrawn.

What is a QCD?

Distributions from an IRA are usually treated as taxable income. However, you can avoid this taxable income by making a Qualified Charitable Distribution (QCD). A QCD is a direct transfer of funds from your IRA trustee to a qualified charity.

Rules, Limitations and Forms

The IRA Rollover was born out of The Pension Protection Act of 2006 (PPA). It was important because it could help older taxpayers satisfy their required minimum distribution (RMD) requirements while obtaining their charitable giving goals. It permitted individuals to roll over up to $100,000 from an individual retirement account (IRA) directly to a qualifying charity without it being included in their gross income. The Act expired and was extended several times until it was made permanent in 2015.

Qualifying for an IRA Charitable Rollover

In order to qualify, a person must adhere to certain requirements:

  • The donor must be at least aged 70 ½ at the time of the gift.
  • Distributions have to be made from the IRA trustee directly to the charity. If a distribution check is made payable to you, the distribution would NOT qualify as a QCD and would be treated as taxable income.
  • IR-2023-215, Nov. 16, 2023-Update
    For those who are at least 73 years old, QDCs count toward the IRA owner's required minimum distribution (RMD) for the year.
  • Distributions must come from a traditional IRA or Roth IRA. Some plans — such as 401k, 403b, and SEPs — are not eligible 

Making a Distribution

Making a distribution is an easy process. Simply contact your plan administrator and tell them you would like to make a charitable donation from your IRA. Typically, they will supply you with a distribution form for you to fill out and return.

In some cases, your administrator may tell you that they have to send the check directly to you. That is fine, however, in order to have a qualified charitable deduction (QCD) the check would need to be made payable to Children At Heart Foundation. You would then simply mail the check to us and tell us which ministry you'd like to designate to receive your gift. NOTE: If the check is made out to you it will not qualify for the charitable deduction.

At the end of the year, the administrator will provide you with a Form 1099-R so you can report it on your taxes. The distribution will go on your Form 1040 tax return, where you will report the distribution as a non-taxed QCD. See the Form 1040 instructions and contact your tax professional for additiona information.

If you have questions on any of the information provided, please contact:

Maynard Phillips
Vice President For Mission Advancement
maynard.phillips@cahm.org
512-246-4222