Qualifying Charitable Distributions

QCD* 

​​For those that have an IRA and cannot itemize their returns, Qualifying charitable distributions (QCDs) allow individuals aged 70½ and older to make tax-free donations directly from their IRAs to qualified charities, helping to reduce taxable income and satisfy required minimum distributions (RMDs).

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Benefits of QCDs

1.   Tax Benefits: QCDs are not included in the donor's taxable income, which can help lower their overall tax liability. This is especially advantageous for those who do not itemize deductions, as the QCD amount can still reduce taxable income. 

 

2.   Satisfying RMDs: For individuals aged 73 or older, QCDs can count toward satisfying the annual RMD requirement, allowing them to donate a portion of their required withdrawals directly to charity. 

 

3.   Eligibility: To qualify for making a QCD, individuals must be at least 70½ years old and the distribution must be made directly from a traditional IRA, inherited IRA, SIMPLE IRA, or SEP IRA. However, QCDs cannot be made from 401(k) plans or other employer-sponsored retirement accounts. 

 

How to Make a QCD

·       Direct Transfer: The funds must be transferred directly from the IRA custodian to the qualified charity. This ensures that the distribution is not counted as taxable income to the donor. 

 

·       Eligible Charities: Donations can only be made to qualified 501(c)(3) organizations. It is advisable to verify the charity's eligibility before making a QCD. 

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*Kiplinger

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