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Roth IRA Conversions: Breaking Free from the IRS Calendar for Better Giving

Every calendar year brings the “December Scramble” … that moment when a donor realizes that their IRA still has a Required Minimum Distribution (RMD) that needs to be made within the calendar year and rush into making a Qualified Charitable Distribution (QCD) so that they can meet the requirements of the IRS.


This is “reactive giving”. You are making a charitable gift because the IRS has told you what to do instead of what your favorite cause or nonprofit may need most right now.


By converting your existing IRA into a Roth IRA, you can eliminate the RMD process and give yourself the gift of time and choice: you decide when and how to make a charitable impact to the causes that are important to you.


This article will explain what a Roth IRA is and the process involved in making your future giving “proactive” instead of “reactive”.


Roth IRA conversion
Give on your own schedule, not just when the IRS requires it.

What is a Roth IRA?


A Roth IRA is an Individual Retirement Account that flips the tax benefits of a traditional retirement plan. Instead of getting a tax break today, you pay taxes on your contributions upfront so that your future withdrawals are 100% tax-free.


A Roth IRA provides three primary tax-free benefits:

  • Tax-Free Growth: Your investments grow without being taxed annually.

  • Tax-Free Withdrawals: Once you have held the account for five years, you can take out every penny of growth without paying a dime in federal income tax.

  • Tax-Free Inheritance: Unlike a traditional IRA, which can be a "tax bomb" for heirs, your beneficiaries can inherit a Roth IRA tax-free.


What makes Roth IRAs uniquely suited for charitable giving?


No RMDs: Because the IRS already got its tax money upfront, they don't care when you take the money out. You can leave the money in the account to grow for decades, allowing you to make a much larger charitable impact later in life.

 

DAF Eligibility: You cannot move money from a traditional IRA into a donor advised fund (DAF) without paying a sizable tax bill. However, you can take a tax-free distribution from your Roth and put it straight into your DAF to "bunch" your charitable giving for the year.


Converting a Traditional IRA into a Roth IRA

The checklist below will take you through the thoughts & steps needed to start and complete the process.


Phase 1: The Strategic Setup

  1. Verify Your RMD Status: If you are age 73+ (or 75+ depending on birth year), you must take your RMD before doing a conversion. RMDs cannot be converted to a Roth.

  2. Target the "Sweet Spot": Identify a year where your income is lower than usual or your charitable deductions will be higher (e.g., you are donating a complex asset).

  3. Open the Destination Account: Ensure you have a Roth IRA account open at your preferred custodian.


Phase 2: Executing the Conversion

  1. Initiate a "Direct Transfer": Request a "Trustee - to - Trustee" or "Same - Trustee" transfer. Avoid having the check sent to you personally to prevent the "60-day rollover" risk.

  2. Select "In-Kind" or Cash: 

o   In-Kind: Moves your current assets as-is (best if you expect the market to rise soon).

o   Cash: Sells the assets first (best if you want to rebalance your portfolio).

  1. Decline Tax Withholding: When the custodian asks if you want to withhold taxes from the IRA, select NO. ( Using IRA funds to pay the tax counts as a distribution and can trigger a 10% penalty if you are under the age of 59 ½ . Pay the tax from your outside cash or savings.)


Phase 3: The Philanthropic Offset

  1. Fund Your DAF: In the same calendar year as your conversion, make your contribution to your donor advised fund.

  2. Maximize the Deduction: Ensure the DAF contribution (cash or complex assets) is large enough to offset the income spike created by the Roth conversion.

  3. Note the 2026 "Floor":  Under 2026 rules, itemized deductions are only valid for the portion that exceeds 0.5% of your Adjusted Gross Income (AGI). Plan your DAF gift accordingly to clear this threshold.

 

Phase 4: Tax Reporting

  1. Collect Your 1099-R: In January of the following year, look for Form 1099-R from your custodian showing the distribution from the traditional IRA.

  2. File Form 8606: This is the critical IRS form used to report the conversion. It tells the IRS how much of the transfer is taxable (usually 100% unless you have "basis" in the account).

  3. Match Your Deductions: Ensure your CPA or tax planner matches your charitable gift receipts (from your DAF or charity) against the conversion income on your Form 1040.


Proactive Giving & Smart Tax Planning


By using a Roth IRA, you are given the gift of patience. Your Roth IRA can continue to grow tax-free. Without being forced to bleed the account each year, you can wait for the right moment(s) to make charitable donations that mean the most for you and your favorite causes.


By using the DAF you created, you can take the tax-free withdrawal out of the Roth IRA and transfer that directly into your DAF. This will earn an income tax deduction that you can use to offset other income you may have.


Next Steps


Deciding if converting a traditional IRA to a Roth IRA can be a complicated process. Is making a charitable impactimportant to you? Do you meet the requirements needed to make such a transfer? Going through these steps and understanding the tax intricacies involved requires expert guidance. Whether working with your current team or building one for you, Generosity Nexus makes complex giving simple and tax-smart. We help you reclaim control of your charitable impact, ensuring you give on your terms—not the IRS’s schedule.


Don’t hesitate to schedule an appointment to learn more about how we can help you.

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