The Nebraska Community Foundation works with community, organizational and donor-advised affiliated funds serving 250 communities located in 80 counties. NCF and its affiliated funds have reinvested $269 million in Nebraska since 1994.
Tax Law Helps Charities, Benefits Donors
Provision includes permanent extension of tax-free qualified charitable distributions from IRAs
Lincoln, Neb. – Individuals who are 70½ years or older may once again roll over up to $100,000 from an individual retirement account (IRA) directly to a qualifying charity without recognizing the distribution to the charity as income. The provision was included in legislation passed by Congress and signed by President Obama in 2015.
The law extends the Charitable IRA Rollover opportunity it permanently. Permanency is important for donors, who will now enjoy certainty and will be able to better manage their income as well as their charitable giving.
The basic rules of the Charitable IRA Rollover, originally enacted in 2006, remain the same. The law permits tax-free distributions to a qualified charity from an IRA held by someone age 70½ or older of up to $100,000 per taxpayer, per taxable year. If married, each spouse can transfer up to $100,000 per year from his or her IRA.
The extension of the charitable IRA rollover is a boon to local charities. The law allows taxpayers age 70½ and older to share their wealth by giving retirement savings directly to charity—and bypassing income tax.
Many Nebraskans have previously taken advantage of the charitable IRA rollover provision through Nebraska Community Foundation (NCF). For example, Ron Parks, founder of Millard Manufacturing Company in Omaha, used a tax-free charitable distribution from his IRA to make a gift to Nebraska Community Foundation’s endowment.
“When I turned 70 ½ I had to start taking a required minimum distribution from my IRA annually, and I have to pay taxes on that. At this point in our lives, Judy and I don’t need the extra income and we certainly don’t need the extra taxes,” Ron said.
“I looked at different ways of charitable giving, including gifts of highly appreciated stocks, gift annuities and life insurance, and for me, the Charitable IRA Rollover seemed like a great way to make a charitable gift.”
Thanks to decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. Charitable individuals and couples have expressed an interest in giving the funds to charity, but without the tax-free rollover provision, income tax had to be paid on all withdrawals. Others are concerned about designating their children as IRA beneficiaries, since that may draw unintended tax consequences.
“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” said Jeff Yost, NCF president and CEO. “Experts estimate heirs may receive less than 50 percent of IRA assets that pass through estates. People can avoid this high level of taxation by making a charitable gift through a qualified charitable distribution from their IRA,” Yost said.
The Nebraska Community Foundation can help donors and their professional advisors execute the transfers and choose from several charitable fund options for their gift. Gifts to life income plans, donor-advised funds and most private foundations do not qualify for tax-free charitable distributions from IRAs.
The Nebraska Community Foundation is a statewide organization using charitable giving to build prosperous communities. NCF works with 1,500 volunteer leaders serving more than 250 communities. Established in 1993, the Nebraska Community Foundation provides training, strategic development, gift planning assistance and financial management for its 224 affiliated funds located throughout the state. In the last five years more than 37,000 contributions have been made to NCF affiliated funds, and more than $125 million has been reinvested to benefit Nebraska communities.