The Qualified Charitable Distribution is an excellent way to show your support for Dexter Southfield and receive tax benefits in return. As you plan your required minimum distributions (RMD) for this year, consider using your IRA account to make the most of your charitable giving. You receive a tax benefit even if you take the standard deduction!
It’s important to consider your tax situation before deciding whether to make a charitable contribution from your IRA. Be sure to share this gift plan with your financial advisor.
John is 71 years old and wants to make a gift to Dexter Southfield. He has $500,000 in his IRA and wants to gift $20,000. He can authorize the administrator of his IRA to distribute $20,000 to Dexter Southfield. Because the IRA Qualified Charitable Distribution is excluded from income, John will not be eligible for a charitable income tax deduction — but he still receives tax savings. The $20,000 distributed to Dexter Southfield will be counted toward his annual minimum required distribution and he will not pay income tax on the portion given to the organization.
The QCD allows individuals 70½ and older to make direct distributions up to $100,000 per year to 501(c)(3) charities without having to count the distributions as income for federal income tax purposes. No charitable deduction may be taken, but distributions will qualify for all or part of the IRA owner’s required minimum distributions.
Individuals 70½ or older at the time of the contribution (you have to wait until 6 months after your 70th birthday to make the transfer).
$100,000 per year. The distribution must be outright to charity.
Distributions must come from your IRAs directly to Dexter Southfield. If you wish to help us with a gift from another retirement asset such as a 401k, 403b, etc., you must first roll those funds into an IRA. Then you can direct the IRA administrator to distribute the funds from the IRA directly to Dexter Southfield.
No, these are not eligible.
We will give you full credit for the entire gift amount. You will also receive a letter, which states that the gift qualifies as a QCD to use for tax reporting purposes.
Yes. Once you reach 70½, you are required to take required minimum distributions from your retirement plans each year according to a federal formula. QCDs count toward your minimum required distribution for the year in which you make the gift.
Yes, every individual who is the owner of a traditional IRA can use the Qualified Charitable Distribution for up to $100,000 each year.
Share this information with your financial advisor. Our office can provide additional information and examples of this gift plan. Call us. We would be delighted to help.
We offer a sample letter you can send to your plan provider to initiate the distribution. Please let your plan administrator know this gift must be sent prior to December 31 to qualify as a charitable distribution for the tax year. Make sure you contact us when you direct the distribution so we can look for the check from your IRA administrator.
For more information, please contact us.
If your administrator provides you an IRA checkbook, please note that the date of your QCD is NOT the date you send the distribution check, but the date that your IRA administrator transfers the funds to the charity. If you want your distribution check to be credited toward the current tax year, it is critical that you mail your check several weeks before the end of the year to ensure there is time for the check to be received by common reporting standards (CRS) and to clear your account. This is especially true if you are relying on those gifts to fulfill your required minimum distribution.
Be sure to check with your financial advisor to determine whether this gift plan is right for you. This information is not meant as tax or legal advice.