What is It?
A Qualified Charitable Distribution is a direct transfer from your IRA
custodian to a qualified charity.
What’s in It for Me?
By contributing your required minimum distribution to charity, you avoid paying income taxes on your required minimum distribution.
The Fine Print
• You must be 70 1/2 or older to be eligible to make a QCD.
• The maximum annual amount for a QCD is $100,000.
• Funds must be distributed directly to the charity to qualify.
What are the Benefits of a QCD?
You meet your legal obligation to withdraw funds from your retirement accounts.
You are doing good by supporting the charitable organizations and causes important to you.
You avoid paying income taxes on the amount of your qualified charitable distribution (up to $100,000).
If you are over 72, you are required to take distributions from your IRA. Those distributions are taxed at your ordinary income tax rate. There is one way to avoid taxes on these distributions: give it to charity.
A Qualified Charitable Distribution (QCD) is a charitable contribution that comes from your IRA to the charity. It is important that the check from the IRA be made DIRECTLY to the charity. The check can be sent to you but needs to be made payable to the charity. There is no need for tax withholding on this type of distribution since it won’t be taxable.
Do not make the mistake of having the check be made payable to you and then making the charitable contribution. You will lose the tax benefits if you don’t follow the right procedure.
This sounds simple enough, but there is one more complication to deal with. When the custodian sends you your 1099-R, the QCD will appear to be taxable in box 2a. The 1099-R form does not have a place to designate these distributions. Therefore, you need to remember to tell your accountant you made the QCD. You can keep the letter from the charity acknowledging your contribution or keep a copy of the check from your IRA made payable to the charity.
STAY IN THE LOOP