Rollover Changes Good for Gifting

Posted by Tom Mellish, Executive Director, IRTA on Jan 28, 2016 2:00:00 PM

Finally some good news to help save on your taxes.

President Obama recently signed legislation to permanently extend the IRA Charitable Rollover. This allows individuals age 70½ or older to transfer up to $100,000 from an IRA to a qualified public charity free of federal income tax.

The amount transferred can also be used to satisfy a donor’s required minimum distribution (RMD).

Why is this such great news for taxpayers that have to take the Required Minimum Distribution (RMD) at age 70½? This announcement will allow you to rollover your (RMD) in a scheduled and planned way instead of having to wait to the last minute to see if Congress was going to resign the Charitable Rollover Act each year.


It always seemed to be December until they took action.

A charitable rollover is a simple way to make a gift. You must be an IRA owner age 70½ or older to be eligible.

You must notify your IRA custodian to make a direct transfer of the distribution amount from the IRA to the Indiana Retired Teachers Foundation. The distribution counts toward your required minimum distribution and you pay no tax on the distribution. Up to $100,000 of the amount transferred qualifies for this beneficial tax treatment.

There are a couple of points to keep in mind when considering a charitable rollover.

Donors who transferred IRA funds directly to a qualified charity this year and met the age requirements should check with an advisor to determine if their transfer qualifies as a tax-free charitable rollover.

Payments may be scheduled monthly, quarterly, annually or semi-annually. Each tax situation is unique. To make a tax free charitable rollover in 2016, donors should consult their advisors and work closely with their IRA custodians to assess each individual situation.

There are many other opportunities to reinvest your RMD and lower your taxable income by funding a Roth IRA or do a Roth Conversion. You may contribute to a Traditional IRA or a Roth IRA for a spouse, child, or grandchild. Donating to a favorite charity such as the Indiana Retired Teacher’s Foundation is another great way to reinvest your RMD.

A Wealth Transfer to Life Insurance policy for yourself or spouse is another investment tax saver. Helping a child or grandchild with college savings by contributing to a 529 College Savings Plan. Funding Healthcare Costs through an HSA can also decrease your tax bite.

You have many opportunities and decisions on how to use your RMD. Consulting a financial advisor or tax accountant may be your best first step.

Happy tax savings.

Topics: finance

Subscribe to Email Updates