In December 2015, the US Congress made permanent a tax break that benefits older donors: the ability to gift to a charity funds directly from an IRA (Individual Retirement Account). There are several rules for this:
- Donors must be 70.5 years or older
- IRA gifts cannot exceed $100,000
- Gifts must go to a 501(c)(3) – FYI: the IRS considers all churches in the US to be 501(c)(3)s.
There are some interesting nuances to IRA gifts:
- The IRA transfer does not show up in the donor’s income but it does meet the mandatory RMD (required minimum distribution) of IRAs
- The church must provide an acknowledgement letter to the donor but the IRA gift does not show up on the donor gift statement from the charity. The reason is that because this IRA amount doesn’t show up on the donor’s Form 1040 under income, it can’t show up on the Form 1040 as a contribution (this prevents double-dipping).
- Checks sent to churches from an IRA sometimes do not have the name of the donor on it. The church will need to research who the donor is in order to send an acknowledgement.
- This gift will benefit some donors more than others. Thus, it is in the interest of the donors to consult their tax or accounting professional to determine if this will help their individual situation.
Churches will be wise to encourage IRA gifts from eligible donors. The following text can be included in the Sunday bulletin during the year.
- The IRS permits people to give from their IRA (Individual Retirement Account) directly to the church. This transfer can be a significant tax advantage. Please consult your tax or accounting professional to see if you should make a gift from your IRA to the church.
Lead On!