Qualified Charitable Distributions

What is a qualified charitable distribution?

Generally, a qualified charitable distribution (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.

Benefits of a QCD:

It could reduce your adjusted gross income and, thus, lower your tax bracket and how much you pay in taxes. You can avoid the 25% penalty imposed if you don't take your required minimum distribution (RMD). You don't have to itemize deductions on your tax return to deduct a QCD from your taxable income.

Why is a QCD better than a charitable deduction?

The IRA assets go directly to charity, so donors don't report QCDs as taxable income and don't owe any taxes on the QCD, even if they do not itemize deductions. Some donors may also find that QCDs provide greater tax savings than cash donations for which charitable tax deductions are claimed.

Here is the typical step-by-step process for making a QCD:

  1. Communicate with your IRA's custodian (where your IRA is held) that you are interested in making a QCD.

  2. Make the request for a QCD in writing.

  3. Specify the dollar amount that you wish to contribute to each individual charity.

Click here for a sample letter requesting a qualified charitable distribution from your IRA.

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