IRA: Charitable Donations from IRAs
Overview:
IRA owners 72 or older may request an IRA distribution to be paid directly to an IRS “qualified charity” and may satisfy a required minimum distribution (RMD) with the withdrawal. Unlike the RMD paid directly to the IRA owner, the QCD is excluded from your taxable income.
Charitable Distributions
What is a Qualified Charitable Distribution (QCD)?
How to determine if a charity can receive the QCD
Where can an IRA owner find additional information on QCDs?
Withdrawal Processing
When can I submit my withdrawal?
Can IBKR customers submit a QCD withdrawal online?
What amount may be withdrawn? Why?
Where are the funds disbursed?
Does the distribution count towards the Required Minimum Distribution (RMD) amount?
Eligible IRA Accounts
Is the Charitable Distribution allowed from all IRAs held at IBKR?
Are the QCDs allowed from other IRA and retirement plans not held at IBKR?
QCD Tax Reporting
How is the QCD reported to the IRS?
Can any taxes be withheld from the distribution?
Do federal taxes have to be paid on the distribution?
Does a state or municipal tax have to be paid on the distribution?
Charitable Distributions
What is a Qualified Charitable Distribution (QCD)?
An otherwise taxable distribution from an eligible IRA owned by an individual 72 or older paid to an IRS qualified charity.
How to determine if a charity can receive the QCD?
The IRS Exempt Organizations Select Check allows users to "Search for Charities" among a list of organizations eligible to receive tax-deductible charitable contributions.
Where can an IRA owner find additional information on QCDs?
Visit Charitable Donations for IRAs for additional information on qualified charitable distributions. See also IRS Publication 590-b.
Withdrawal Processing
Account holders may submit a third party withdrawal from your IRA to a charity at any time via Client Portal. Any request designated as third party is subject to legal and compliance review. Therefore, we recommend that you allow enough time to meet the year end IRA withdrawal deadline.
As the circumstances associated with each request tend to be unique, IBKR cannot provide any assurance as to how long the review process will take or even whether the request will be approved at the conclusion of the review.
Can IBKR customers submit a QCD withdrawal online?
Yes. Account holders submit third party withdrawal requests via Client Portal.
What amount may be withdrawn? Why?
IBKR will process the withdrawal for any amount, as long as the account has sufficient available funds. Why? Although the QCD donations to the charity must not exceed $100,000 per year to retain QCD status, charitable gifts may exceed this limit.
Where are the funds disbursed?
Funds are made payable to the IRS qualified charity and mailed direct to the charity. Only funds disbursed to the charity can be designated from your IRA as a QCD.
Does the distribution count towards the Required Minimum Distribution (RMD) amount?
Yes
Eligible IRA Accounts
Is the Charitable Distribution allowed from all IRAs held at IBKR?
No, see the list below. IRA owners should contact a qualified tax advisor about how to preserve QCD tax benefits. Not all distributions are created equal. A tax advisor will be able to assess an IRA owner’s best choice.
Traditional IRA > YES
Rollover IRA > YES
Roth IRA > YES
Inherited IRA > YES, if the beneficiary is at least age 70 1/2
SEP IRA > NO
Education IRA > NO
Are the Charitable Distributions allowed from other IRA and retirement plans not held at IBKR?
No, not directly. Retirement plans, employer sponsored SEP IRAs, and Simple IRAs (account classifications not held at IBKR) are not eligible for a QCD election. IRA owners may be eligible to rollover assets from these plans into a traditional, rollover, or Roth IRA to request a charitable distribution. IRA owners should contact a qualified tax advisor or their retirement plan administrator.
QCD Tax Reporting
How is the QCD reported to the IRS?
IBKR will report the charitable distributions on Form 1099-R when issued. See Reports and Dates for 1099 availability dates.
Can any taxes be withheld from the distribution?
No.
Do federal taxes have to be paid on the distribution?
Generally, federal taxes are not paid with QCDs. But distributions in excess of the IRS limit may be subject to income tax. IBKR recommends that customers contact a qualified tax advisor.
Does a state or municipal tax have to be paid on the distribution?
Contact your tax advisor or local tax authority on state and municipal requirements for the distributed amount.
Disclaimer: IBKR does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.
Overview of Fees
Clients and as well as prospective clients are encouraged to review our website where fees are outlined in detail.
An overview of the most common fees is provided below:
1. Commissions - vary by product type and listing exchange and whether you elect a bundled (all in) or unbundled plan. In the case of US stocks, for example, we charge $0.005 per share with a minimum per trade of $1.00.
2. Interest - interest is charged on margin debit balances and IBKR uses internationally recognized benchmarks on overnight deposits as a basis for determining interest rates. We then apply a spread around the benchmark interest rate (“BM”) in tiers, such that larger cash balances receive increasingly better rates, to determine an effective rate. For example, in the case of USD denominated loans, the benchmark rate is the Fed Funds effective rate and a spread of 1.5% is added to the benchmark for balances up to $100,000. In addition, individuals who short stock should be aware of special fees expressed in terms of daily interest where the stock borrowed to cover the short stock sale is considered 'hard-to-borrow'.
3. Exchange Fees - again vary by product type and exchange. For example, in the case of US securities options, certain exchanges charge a fee for removing liquidity (market order or marketable limit order) and provide payments for orders which add liquidity (limit order). In addition, many exchanges charge fees for orders which are canceled or modified.
4. Market Data - you are not required to subscribe to market data, but if you do you may incur a monthly fee which is dependent upon the vendor exchange and their subscription offering. We provide a Market Data Assistant tool which assists in selecting the appropriate market data subscription service available based upon the product you wish to trade. To access, log in to Portal click on the Support section and then the Market Data Assistant link.
5. Minimum Monthly Activity Fee - there is no monthly minimum activity requirement or inactivity fee in your IBKR account.
6. Miscellaneous - IBKR allows for one free withdrawal per month and charges a fee for each subsequent withdrawal. In addition, there are certain pass-through fees for trade bust requests, options and futures exercise & assignments and ADR custodian fees.
For additional information, we recommend visiting our website and selecting any of the options from the Pricing menu option.
Withdrawal restrictions applicable to assets transferred via ACATS
Assets transferred to IBKR via ACATS are subject to a withdrawal hold period of up to 30 days, the count of which begins the day after the transfer has settled and ends at midnight of the 30th day thereafter. Note that assets are often credited to an account holder’s equity and made available for trade prior to transfer settlement. The date at which a given ACATS deposit is eligible for withdrawal may be determined through the Transaction History function within Client Portal.
Links:
How can I check the status of funding transactions?
Overview:
IBKR provides account holders with a tool that provides real-time updates and current status of all deposit and withdrawal transactions relating to both cash and positions which have taken place over the prior 45 calendar day period. This tool is made available through the secure Account Management application and may be accessed via the Transfer & Pay and then Transaction History menu options.
Display
By default, the Transaction History page shows all of your funding transactions for the past ten days. You can adjust that up to the past 90 days by adjusting the time slider. Click and drag the slider right or left to change the time. The page updates to display all of your funding transactions for the selected period.
By default, transactions are displayed by date in descending order. Change the sort order by clicking any column heading. To change the sort order from descending to ascending, click the column heading again. For example, if you want to view all deposits listed together, click the Type column heading.
Click the Configure (gear) icon to configure the transaction history to display additional information, including Account ID, Account Title and Method.
To view transaction details, click anywhere on a transaction row. Details for the transaction appear in a popup window. From the transaction detail popup window, you can perform any of the following operations:
- Cancel any transaction that has a status of Pending by clicking Cancel. Click Yes to confirm the cancellation.
- Print the transaction details by clicking Print.
- Stop payment on a check withdrawal.
- Close the popup window by clicking the X icon in the upper corner.
- Note: DO NOT CLICK THE CANCEL BUTTON UNLESS YOU WANT TO CANCEL THE TRANSACTION.
Search and Filter
Search for a specific transaction by Account ID, Account Title, Transaction Type (deposit, withdrawal, etc.), Transaction Method (check, wire, etc.), or Status by typing the search criteria in the Search field, and then clicking the Search (magnifying glass) icon. Search words are not case-sensitive.
Filter the transaction history by Transaction Type, Method or Status.
Print and Export
To print the transaction history as currently displayed, click the Print icon located in the upper right corner of the screen.
To export your transaction history to an XLS file (Microsoft Excel-compatible), click the Export icon located in the upper right corner of the page. You are prompted to save or download the .XLS page to your computer (depending on your web browser). Once saved, you can open that file in Microsoft Excel.
Links:
Availability of proceeds in a 'Cash' type account
Accounts which have been set up as a 'Cash' type do not have access to the proceeds from the sale of securities until such time the transaction has settled at the clearinghouse and proceeds have been issued to IBKR. Securities settlement generally takes place on the third business day following the sale transaction. Providing access to the funds prior to settlement would constitute a loan, a transaction which is precluded from taking place within this account type.
The one exception is under the Free-Riding rule. Clients with a cash account can use the proceeds from the sale of a security to purchase a different security under the condition that the second security is held until settlement of the initial sale. If the client sells the second security prior to settlement of the initial trade, they will be in violation of the Free-Riding rule and will be locked for 90 days from utilizing this exception.
Account holders who wish to have access to settled funds prior to the settlement day may do so by electing an account type of 'Margin'. Under this account type unsettled funds may be used for trading purposes but may not be withdrawn until settlement. Account holders maintaining a 'Cash' account may request an upgrade to a 'Margin' type account by logging in to Client Portal and selecting the Settings > Account Settings menu item and Account Type from the Configuration panel. Upgrade requests are subject to a compliance review to ensure that the account holder maintains the appropriate qualifications.
Links:
Are the proceeds from a closing stock sale made available immediately to my account?
IBKR allows account holders to designate and maintain their account as either a 'Margin' or 'Cash' type of account at the point of application. If one maintains a 'Margin' type account, the proceeds from closing stock sales are made available for trading effective with the sale transaction. However, the account holder may not withdraw those funds from the account until such time as settlement has taken place and IBKR has been credited with the proceeds from the clearinghouse (generally 3 business days).
If one maintains a 'Cash' type account, proceeds from closing stock sales are not available for trading or withdrawal until settlement has been completed. To provide otherwise would constitute an extension of credit which is prohibited from being offered to 'Cash' accounts.
Click here for information on upgrading from a 'Cash' type account to a 'Margin' type account.
What does the 'Pending Advisor' status mean next to my withdrawal request?
Overview:
In the Transaction History section of Client Portal, client accounts who are logged in and have requested a withdrawal, may see the status as 'Pending Advisor'.
Information:
In the advisor structure, client accounts can request withdrawals by logging in to Client Portal just as any individual account would. Once a withdrawal request is made by a client account, the advisor must consent to the request. If the Advisor does not consent to the request, the withdrawal will still be processed, but there will up to be a three business day delay.
Advisor Steps to Confirm:
Once a withdrawal request has been submitted by a client account, the advisor will receive an email notification, stating that a client has requested a withdrawal. In order to consent, the advisor must log in to Advisor Portal and navigate to Manage Clients then Dashboard and the Pending Items tab. The advisor would then click the 'Consent' button in order to expedite the processing of the pending withdrawal.
Note about hold periods:
In order to ensure the timely processing of client initiated withdrawal requests, the hold period for withdrawals where the amount of the request is greater than 80% of the amount available for withdrawal, will be held until consented to by the advisor or 3 calendar days, whichever comes first. For amounts representing less than 80% will be held until consented to by the advisor or the next business day.
These holds are in place to ensure that your advisor is aware of your withdrawal request and is afforded time to make funds available if necessary.
How do I transfer US Securities to IB from another broker?
Overview:
Broker to broker transfers for US securities are conducted via a process known as the Automated Customer Account Transfer Service (ACATS). This process generally takes between 4 to 8 business days to complete in order to accommodate the verification of the transferring account and positions. The request is always initiated by the receiving broker. Please note that brokers generally freeze the account during this period to ensure an accurate snapshot of assets to transfer and may restrict the transfer of option positions during the week prior to expiration.
FAQS
What does the ACATS system enable my broker to do?
The NSCC's ACATS system enables your broker to enter, review, and settle account transfers in a fully automated system.
The NSCC's ACATS system enables your broker to enter, review, and settle account transfers in a fully automated system.
How long does an ACATS usually take?
Under normal circumstances, an ACATS should take between four to eight business days. With some circumstances, such as an attempt to transfer unsettled funds, positions that are not paid in full, or restricted stock shares, this process could take longer.
Under normal circumstances, an ACATS should take between four to eight business days. With some circumstances, such as an attempt to transfer unsettled funds, positions that are not paid in full, or restricted stock shares, this process could take longer.
Should I wait for my IB account to be approved before electing to fund it via ACATS?
No. In order for your application to be considered for approval, you must specify a funding election. Note, however, that IB will not initiate your ACATS reqquest until such time as your account has been approved.
No. In order for your application to be considered for approval, you must specify a funding election. Note, however, that IB will not initiate your ACATS reqquest until such time as your account has been approved.
How do I initiate an account transfer that IB will receive?
The ACATS feature is available under Account Management. Choose the Funds Management and then Position Transfers menu options. After selecting the ACATS - US Broker Transfer method, you will be prompted to specify whether the transfer is full or partial, the delvering broker and, if partial, the positions to be transferred.
The ACATS feature is available under Account Management. Choose the Funds Management and then Position Transfers menu options. After selecting the ACATS - US Broker Transfer method, you will be prompted to specify whether the transfer is full or partial, the delvering broker and, if partial, the positions to be transferred.
What if my current brokerage firm is not listed on the delivering firm dropdown menu?
The dropdown menu is a listing of Clearing Firms that are participants in the ACATS program. Not all firms are self-clearing. If you do not find your firm on the list, please contact one of their representatives to identify their clearing firm.
The dropdown menu is a listing of Clearing Firms that are participants in the ACATS program. Not all firms are self-clearing. If you do not find your firm on the list, please contact one of their representatives to identify their clearing firm.
What products can I transfer?
Interactive Brokers accepts only products that are available for trading. Certain Fixed Income issues, Mutual Funds and Limited Partnership units are not eligible to be held in your Interactive Brokers account.
Interactive Brokers accepts only products that are available for trading. Certain Fixed Income issues, Mutual Funds and Limited Partnership units are not eligible to be held in your Interactive Brokers account.
Can I transfer a Traditional IRA to a Roth IRA?
No. IRAs may only be transferred to the same type of IRA (i.e. Traditional to Traditional, Roth to Roth, etc.). Also note that IRAs cannot contain any margin loans, short positions, or equity option positions.
Links:
Why does the system not recognize my SWIFT code?
Overview:
S.W.I.F.T stands for Society for Worldwide Interbank Financial Telecommunication. It is a non-profit organization comprised of member financial institutions.
Only SWIFT codes which are part of the SWIFT network are recognized as SWIFT codes.
Why do certain cash deposit and withdrawal requests require that an instruction be created while others do not?
Overview:
Whether or not an instruction is required is a function of both the transaction type (i.e., deposit or withdrawal) and its underlying method (i.,e. check, ACH initiated at IBKR or wire). In general, if the deposit method dictates that IBKR pull funds directly from the client’s account or if the withdrawal method dictates that IBKR push funds directly to the client’s account, an instruction will be required in order to obtain the necessary account specific information and authorization to act. Outlined in the chart below are the possible scenarios.
|
INSTRUCTION REQUIREMENTS BY TRANSACTION TYPE & METHOD (Yes/No) |
|||||
|
|
Check |
ACH – at Bank |
ACH – at IBKR |
EFT |
Wire |
|
Deposit |
No |
No |
Yes |
Yes |
No |
|
Withdrawal |
No |
N/A |
Yes, if instruction is created as Debit/Credit, no if Credit only |
Yes |
Yes |
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