Making your gift from retirement funds can offer significant tax and planning advantages by withdrawing funds yourself and taking an offsetting deduction in the same tax year, or by making a qualified charitable distribution. Either method counts toward distribution requirements (RMD) and removes assets from the estate.

There is no set limit for withdrawing money from a retirement account, recognizing for income tax, and taking an offsetting deduction beyond the IRS deduction limitation of 60% of adjusted gross income. Gifts made using retirement funds that the donor has recognized for tax can be used to establish a charitable gift annuity or charitable trust. See Create Income Now for information on gifts that provide income benefits.

Qualified charitable distributions (IRA charitable rollovers) bypass recognition for income tax of up to $111,000 per year from an IRA, which may be attractive to non-itemizers. A spouse can also make up to a $111,000 QCD, if the couple files a joint income tax return. See sample letters you can download to instruct your IRA administrator and notify Princeton.

The SECURE Act (Setting Every Community Up for Retirement Enhancement Act), in effect as of Jan. 1, 2020, changes rules on funding retirement savings.

Donors should consult with their tax advisors to understand how retirement funds may be used for charitable giving for their situation.

As of January 1, 2023, donors can use a QCD to fund life income gifts to Princeton under new rules passed as part of the Consolidated Appropriations Act, 2023.

How it works:

A Qualified Charitable Distribution (QCD) allows an individual age 70½ or older to direct funds from an IRA directly to a qualified charity. The IRA custodian sends the funds directly to the charity, and the distribution can satisfy all or part of the donor’s Required Minimum Distribution (RMD) while being excluded from taxable income.

Eligibility: 

• Must be age 70½ or older on the date the distribution is made.
• The gift must be made directly from an IRA to a qualified charitable organization.
• The distribution must come from an eligible IRA account and be made to a qualifying charity. 

Benefits:

• Excludes the gift amount from federal taxable income, potentially reducing overall tax liability.  
• Counts toward all or part of an annual RMD requirement, if applicable.
• May lower Adjusted Gross Income (AGI), which can help reduce the taxation of Social Security benefits and Medicare premium surcharges (IRMAA).

Could a charitable distribution from an IRA work for you? Please contact us.

Please see our IRA QCD to Life Income Gift fact sheet for more information. 

*Certain IRS limitations apply. The information presented is not intended as legal or financial advice. Please consult your own professional advisors to discuss your specific situation.

The SECURE Act (Setting Every Community Up for Retirement Enhancement Act), in effect as of Jan. 1, 2020, changes rules on funding retirement savings.

Previously, most retirees were required to take a Required Minimum Distribution (RMD) from their retirement accounts at age 70½. The new beginning date for RMDs will be age 72. (However, if you reached age 70½ by the end of 2019, your RMD beginning date is set, and the SECURE Act does not change the requirement date for you.)

It is important to note that the SECURE Act does not change the age at which you can make a Qualified Charitable Distribution (QCD) from your IRA, which remains at age 70½.

The SECURE Act also removed certain provisions for beneficiaries of IRAs and defined contribution plans like 401(k)s. Most IRA beneficiaries will now have to distribute their entire inherited retirement account within 10 years of the year of death of the owner. In some cases, it might make sense to leave your IRA to a charity and purchase life insurance for your children or create a charitable remainder trust to maximize legacy benefits.

Speak to a qualified professional about these new rules and your financial and retirement situation.

Our legal name is: Trustees of Princeton University
Our tax ID number is: 21-0634501
Our address and contact information for estates and trusts is:
Gift Planning
Princeton University
100 Overlook Center, Suite 300
Princeton, NJ 08540
609.258.6318