Posted by Mike Zongolowicz

When we make charitable contributions we typically write a check, transfer online or use a credit card.  The expectation is that these contributions will qualify as a charitable deduction at the time a tax return is filed.  Because of recent changes to the tax code, about 40% of taxpayers are unable to itemize deductions on their federal tax return.  That percentage is higher for those over age 65.

For some, larger charitable gifts come at the cost of reducing cash flow, therefore reducing the inclination to make contributions.

There are a number of methods to make contributions to the Rotary Foundation that can alleviate these problems.  Let’s explore a couple of alternatives.

                                         The IRA Charitable Rollover

For individuals who have reached age 70 1/2 before December 31, 2019 or will reach age 72 on or after January 1, 2020, the IRA Charitable Rollover is a prime vehicle to reduce taxable income while making an impactful gift to the Foundation.  

Basic guidelines to qualify for the rollover are:

     1) The contribution is to be made only from an IRA.  If you have a pension, profit

         sharing, 401(k) or 403(b) plan, consider rolling those assets to an IRA to qualify

         for the benefit.

   2) The gift can be made to satisfy your required distribution for a year up to a 

        $100,000 per person maximum.  For a married couple with separate IRAs, 

        a $200,000 maximum applies.  There is no minimum.

   3) The amount of the gift will not be reported as part of adjusted gross income on     

        yourtax return. This provides a meaningful tax benefit to those who are unable to 

         itemize deductions.

   4) The gift must be facilitated through the agent administering the IRA.  A distribution

        directly to the taxpayer will result in its inclusion in adjusted gross income which

        may negate the potential tax benefits.

   5) The gift must be made by December 31 for those who qualify andcan be made

         on an annual basis                                                                                                                         

The Charitable IRA Rollover can be used to fund annual Paul Harris Society contributions.

It must be noted that pursuant to the CARES Act, signed into law on March 27, in response to the pandemic, required distributions from IRAs are waived for 2020.



     The Charitable Gift Annuity

A Charitable Gift Annuity is a contract between the Foundation and the donor or donors that provides guaranteed annual income in exchange for a donation.  The percentage distributed via the annuity is based on the age or ages of the recipients of the annuity payments.  In almost all cases the percentage pay-out will exceed that provided by a Certificate of Deposit from an American bank.

How it works:

   1) The donor(s) enters into a contract with the Rotary Foundation to establish the Gift Annuity.  The Foundation will provide the basic contract. 

       A minimum $10,000 contribution is required.

    2) Pay-out percentages are based on the age of the recipient(s). The percentages are based on guidelines established by the American Council on Gift 


        For example, current rates run from 1.5% for a 5 year old to 8.6% for an individual age 90 or above.  There are adjusted pay-out rates for couples.

    3) An actuarial computation is made to determine what amount of the contribution may be claimed as a charitable deduction.  As with pay-out rates, the 

        older the recipients, the greater the deduction.

    4) Payments will be made annually to the beneficiary or beneficiaries.

   5) Annuities can be established to benefit individuals other than the donor(s).  

        Income taxes are than paid by the recipients

   6) Appreciated property can be used to fund a Gift Annuity, thereby reducing or 

        deferring capital gains taxes.

   7) There is no limit as to how many annuities can be established.  Pay-outs can also

        be deferred.  Deferrals can be used as an excellent retirement planning strategy.


 Submitted by Mike Zongolowicz, CPA (retired) 

 Rotary Club of Sun City