Donating from your IRA is a Win - Win
The Grand Rapids Area Community Foundation is celebrating the Community Giving to Community matching funds campaign on Tuesday, December 3. Why December 3? Every year, the Tuesday after Thanksgiving is referred to as Giving Tuesday, an internationally recognized day of giving back to the causes you love. This special day follows Black Friday, Small Business Saturday, and Cyber Monday, and is a day dedicated to taking a break from gift shopping for your favorite people and instead give a gift to your favorite charitable cause.
Giving directly from your IRA to your local Community Fund
Have you ever considered giving directly from your IRA to your favorite charity? IRS tax law has simplified this option and offers significant benefits to the giver.
“The benefit of this rule is that the donation is no longer a deduction, but, rather the IRA distribution could be excluded from gross income,” says Chris Fulton, Executive Director of the Grand Rapids Area Community Foundation. “Individuals over 70½ years, can gift directly from their IRAs rather than taking a distribution that would trigger an income-tax bill. So, the donor could get a tax benefit and is able to contribute to their favorite charity; a win-win for the donor.”
To be tax free, the donation must go directly from the account to the charitable organization with no intervening possession or ownership of the IRA owner. Everyone’s situation is different, and for specifics, you should talk to your professional advisor. (Just remember you must transfer your distribution, not take your distribution.)
The IRA owner can direct the IRA administrator to transfer the required minimum distribution to a charitable organization, which precludes that amount from going to the IRA owner as annual income. Less annual income generally means a reduction in income taxes. For many people, those tax savings can be significant. Some IRA administrators even provide checks for charitable donations, assuring you will have proper records. If you don’t have that option, the Grand Rapids Area Community Foundation will work with you to process the appropriate paperwork.
How this works when giving to your local Area Community Fund
An IRA owner from the Deer River Area who is over 70½ years is told by their IRA administrator that their required minimum distribution for 2019 is $20k. In this case, the person has sufficient income and does not need additional annual income from their IRA. Therefore, the IRA owner directs the IRA administrator to transfer the required minimum distribution directly to the Grand Rapids Area Community Foundation, to be placed into the Deer River Area Community Fund. This amount is therefore not added to the IRA owner’s annual income, so income taxes are not impacted. Once the transfer is made to the Community Foundation, the gift amount is added to the Deer River Area Community Fund and the gift is doubled with the matching grant provided by the Community Foundation, thanks to the Blandin Foundation matching grant. This $20K transferred IRA results in a gift of $40K to the Deer River Area Community Fund.
“This is the final year to double your gift with the Blandin Foundation matching grant. Imagine the impact your gift will have on your community - making the place you love better for your grandchildren – and their grandchildren,” says Fulton. “That is the permanent power of community funds and why this opportunity to grow these funds is so important.”
The five Area Community Funds provide a way for citizens and businesses to give to their local community. These growing Community Funds are in the areas surrounding Deer River, Greenway, Hill City, Nashwauk, and the Greater Itasca Area. Each Fund has an advisory committee of local volunteers that oversee grants for programs and activities throughout the community. Annual earnings derived from the invested endowment are granted to local non-profit and charitable needs that benefit local families.
Donations to a Community Fund can take many forms, from cash to gifts of assets such as property or stock. All gifts and donations to Area Community Funds are accepted through the Grand Rapids Area Community Foundation and go directly in to the specified Area Community Fund. You can make your donation in person, through the mail or online. Call (218) 999-9100 to find out more about donating assets to support your favorite community fund. We can help you arrange something now, or as part of a future estate plan.
Checks must be made payable to: The Grand Rapids Area Community Foundation.
Place the name of your Community Fund on the memo line.
Grand Rapids Area Community Foundation: 350 NW 1st Avenue, Suite E, Grand Rapids,
Minnesota 55744. Phone – (218) 999-9100. Website – www.gracf.org
Some Additional Information:
The requirements for a qualified charitable distribution are relatively simple. The charitable distribution must be:
From a traditional IRA or a Roth IRA;
Direct from the IRA owner to the charitable organization—with no intervening possession or ownership by the IRA owner;
On or after the IRA owner has reached age 70½ and is subject to the mandatory IRA minimum withdrawal provisions of federal tax laws;
A contribution to an organization that would qualify as a charitable organization under Sec. 170(b(1)(a), other than a private foundation or donor advised fund. In other words, what most often are referred to as 501(c)(3) charitable organizations (including the Grand Rapids Area Community Foundation);
The maximum annual amount that can qualify for a qualified charitable distribution is $100K.