Qualifying Charitable Distributions (QCD)
- allow you to donate up to $100,000 per year directly to qualified charities
- are excluded from income
- can enable you to shield some or all of your Required Minimum Distribution (RMD) from taxes – RMD’s start at age 72 for “Traditional” IRAs
- require your contribution to go directly from your IRA to the qualified charitable organization of your choice
ALWAYS SEEK PROFESSIONAL TAX ADVICE BEFORE TAKING DISTRIBUTIONS FROM RETIREMENT ACCOUNTS.
DONOR ADVISED FUNDS
After years of success, you are very open to sharing your wealth. A QCD allows you to make tax-free donations of up to $100,000 per year directly from your IRA (other than a SEP or SIMPLE IRA) to a qualified charity. These QCDs can be counted towards satisfying annual Required Minimum Distribution (RMD) from your “Traditional” IRA retirement account. If you are over the age of 70½ and motivated towards charitable giving, this tax strategy makes incredible great sense and should definitely be explored as a part of your financial planning strategies. Some thoughts for consideration:
- If you took $100,000 out of your IRA and then gave that sum to charity, the $100,000 donation is included in your gross income.
- A lower AGI can reduce the amount of your Social Security benefits that are subject to tax and can increase the amount of medical and miscellaneous expenses you can deduct.
- A lower AGI may also reduce your Medicare premium.
- The QCD rule applies to individual IRA’s, so both you and your spouse (over 70½) can double the benefit when filing jointly!
To take advantage of QCD’s the requirements are straightforward:
- Funds must be drawn from an IRA – employer plans are not eligible.
- Funds must go directly from the IRA institution to the charitable organization – you, the account holder cannot have any custody of the money!
- The account owner must be at least age 70½.
- The funds must go to a qualifying charitable organization – QCD’s cannot go to private foundations or donor advised funds.
- $100,000 limit per year.
Jane is an active and generous 72-year-old who regularly gives to her church and other charities. In retirement, she and her 74–year–old spouse, Bill, have substantial amounts in their “Traditional” IRAs. Jane and Bill now have Required Minimum Distributions they must take out each year from their IRAs – i.e. the amount the government requires them to withdraw and pay taxes on each year. Jane will now send the funds directly from her individual “Traditional” IRA to her qualified charities (up to $100,000 – each year), and this will be included as her annual charitable donation. Bill can also do the same from his “Traditional” IRAs.
Since the funds go directly from their “Traditional” IRAs to the qualified charity, the money is never under their custody in their bank account and therefore is not included in their annual AGI, thus allowing for them to make a generous charitable donation while limiting taxes.
For successful retirees over age 70½, QCDs are a great way to do good for others while doing good for yourself and your family.
Qualified charitable distributions (QCDs)
What is a qualified charitable distribution?
Generally, a QCD is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. See Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) for additional information.
Can a QCD satisfy my Required Minimum Distribution (RMD) from a “Traditional” IRA?
Yes, your qualified charitable distributions can satisfy all or part the amount of your Required Minimum Distribution from your “Traditional” IRA. For example, if your 2019 Required Minimum Distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2019, you would have had to withdraw another $5,000 to satisfy your 2019 RMD.
Note: The Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act, enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans. https://www.irs.gov/newsroom/irs-announces-rollover-relief-for-required-minimum-distributions-from-retirement-accounts-that-were-waived-under-the-cares-act
If you are interested in learning more about how your support can impact military families across our country please contact Project Sanctuary Chief Development Officer, Carrie Bair-Norwood at email@example.com or 719.201.9373.
Donations can be mailed to:
PO Box 1563
Granby, CO 80446